The year 2009 was characterised by a restrained investment in IT
owing to the global meltdown and ensuing economic uncertainty among
most verticals. However, the BFSI sector is an exception—this
sector spent considerably on IT in the same period.
The Infrastructure Agenda 2010 survey findings indicate that the IT
budget allocation in most organizations in this sector will see a
minor increase (between 20 to 40 percent) or will remain almost the
same as 2009. Only a few organizations in this sector are looking
at substantially larger investments in IT than the previous
year.
The survey reveals that interest in BI continues to remain high
with 83 percent of the respondents planning to increase their
investments in BI in 2010. Going forward, as banks continue to
explore new opportunities, the role of BI technologies in
accurately understanding customer requirements will be crucial. For
example, information on the age and spending patterns of a person
can be used to cross sell different products such as home loans,
credit cards, mutual funds or fixed deposits.
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ANALYST VIEW
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Arup Roy – Senior Research
Analyst, Gartner
Hyper competition in the banking and insurance segments, major
expansion plans and renewed focus on customer services will see
considerable investments in IT from the BFSI sector to meet the
business demands.
With foreign banks looking to invest in Indian private banks, there
will be an increased focus on meeting the regulatory and compliance
rules laid down by the RBI. Compliance requirements would also
include maintenance and management of historical records which, in
turn, would translate into storage requirements.
There will be an increased focus on CRM both from a software and
services point of view. Improving customer experience along with
business expansion plans would also have banks opening up new
branches in remote locations. Connectivity to these locations and
facilities such as mobile kiosks would again have considerable IT
investments coming in from this sector.
Since this vertical has been more open to adopting technologies,
organizations in this sector are also looking at adopting cloud
services from the point of view of reducing costs and increasing
overall efficiency. However since the cloud computing platform is
not a proven model yet, most implementations are currently in the
pilot stage. That said, SaaS has been well highlighted and used by
many banks for applications such as CRM.
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The goal—to come up with targeted financial products that
have better chances of conversion into sales. Many leading banks in
India are already extensively using BI to achieve this goal, and
this number is only likely to accelerate in the near future.
| Figure 1: Outlook for IT budget by CIOs from BFSI
segment |
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All the survey respondents from the BFSI sector opine that security
will be a major area of investment. Given the increase in both
internal and external threats to intellectual property, and the RBI
mandate on meeting compliance and regulation requirements,
organizations across the sector would want to look at strengthening
their security perimeter and ensuring optimum governance and
compliance.
While there is an equal emphasis on increasing IT spends on
virtualization and BI in the next year, 90 percent of the
respondents believe that investments in storage would increase
owing to ever-increasing demands of data storage and backup. 72
percent expect greater investments in document management systems.
An overwhelming 75 percent expect substantial IT spending on Web
2.0 tools in 2010. This can be attributed to the fact that
crunching budgets, increasing competitiveness and changing customer
expectations now require organizations in this sector to use new
channels of communication to attract and retain customers, improve
customer response time and the overall customer experience.
Reducing costs and yet driving business efficiency through IT is
something that organizations across different verticals have been
looking at enforcing in 2009. Mirroring this trend, while 83
percent of the respondents expect increased investments in
virtualization and server consolidation, 58 percent feel the need
to invest further in SaaS or cloud computing in 2010. While there
is increasing interest in cloud-based services, organizations have
been adopting a cautious approach towards cloud-based delivery
models due to concerns related to moving to the cloud.
| Figure 2: Technologies that companies in the BFSI
segment will invest in to save operational costs using
IT |
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50 percent of the survey respondents expect increased investments
in energy-saving technologies in the next year. These investments
can be attributed more to the need to reduce overall energy
consumption and associated costs—rather than factors such as
corporate social responsibility or carbon credits. Twenty-five
percent of the respondents expect increased investments in video
conferencing or unified communications infrastructure, to save on
travel and communication costs and improve employee collaboration
and productivity. Thirty-three percent expect further investments
in open source technologies.
| Figure 3: Top challenges for CIOs in this
domain |
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The use of open source can be attributed to the need to reduce the
overall cost of ownership associated with software licensing. While
a good 41 percent of the respondents use operating systems based on
open source platforms, 33 percent use open source office
applications. Around 25 percent either have some kind of open
source enterprise applications running within their IT
infrastructure or use application development tools based on the
open source platform.
This growing adoption may be attributed to increasing levels of
awareness, the presence of prominent SaaS vendors in the country,
and the fact that the SaaS model is known to provide a
cost-effective, robust and scalable solution. While 33 percent of
respondents have either their enterprise applications or office
applications delivered via the SaaS model, 25 percent use a
SaaS-based messaging solution.
Responding to the top challenges an IT head in this vertical
typically faces, 50 percent of the respondents cited integration of
disparate systems and applications as major challenges they
encounter.
The cost, time and effort spent in managing different systems and
application configurations also creates a major IT bottleneck. One
fourth of the total respondent base stated that shortage in IT
skills was an issue that needs to be addressed. Only 16 percent
felt that the lack of a budget creates a bottleneck for IT
implementations.
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Sunil
Rawlani
Executive VP and Head, IT, HDFC
Standard Life
The insurance industry is evolving progressively. The challenge
lies in adapting to the changing regulations. Also, allocating IT
usage costs to the business is something which needs to be looked
at. We will focus on bringing all IT application projects under the
Program Management umbrella. Our priority will be to implement best
practices such as Control Objectives for Information and related
Technology (COBIT), Information Technology Infrastructure Library
(ITIL) and Business Service Management (BSM) for all applications
in order to ensure better responsiveness and a renewed business
alignment.
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Deepak
Shivathaya
IT Head, Religare Asset
Management
The economic situation over the last year has compelled us to
look at newer ways of retaining the customer. It has also called
for fine tuning capital spends and operating budgets. Regulatory
compliance is also a key focus area. With the workforce
increasingly going mobile, we also need to look at providing our
employees with functionalities that will keep them informed,
responsive and constantly connected. However the associated
security concerns will also be a key challenge that needs to be
effectively addressed. One of our key IT initiatives includes an
increased focus on BI and Analytics and the availability of tools
that will provide this functionality to all the decision
makers—both inside and outside the organization. We will also
look at device management solutions which will enable IT to
distribute and synchronize files on mobile devices, and configure,
backup, and restore them remotely.
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B G Pal
CIO, Tata AIG General
Insurance
The primary challenge that we see is the lack of a unified
platform or system for transaction processing across all
stakeholders and product lines running in tandem with an effective
collaborative platform. There is also a need for a robust CRM
system which would integrate with an enterprise data warehouse
based on a unique customer ID. Another challenge is document and
workflow management. There is a need for a unified repository for
electronic documents with workflow and integration with
transactional systems (document management systems). Key
initiatives for 2010 would include:
- Development of a unified
integrated insurance portal enabling all stakeholders (customers,
intermediaries and internal staff) to process insurance
transactions
- Deployment of an
off-the-shelf full-fledged CRM system for sales and service
- Deploying a document
management system to create a central repository of all documents
with transaction system integration and in-built document
workflows
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