Capital Market Firms Must Rely on ‘Technology that Saves’ to Fund ‘Technology that Transforms’— Everest Group

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High cost pressures, market uncertainty drive decline in application outsourcing deals and rise in vendor consolidation, according to research reports from Everest Group.

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The imperative for capital market firms is to focus on growth, profitability and managing risk, and their IT investment must be focused on cost optimization and improving the customer experience.

Capital market firms—which are operating under difficult market conditions, facing an increasingly complex regulatory environment and competing with aggressive new financial technology entrants—find themselves needing to invest in next-generation technologies while holding IT budgets steady, according to new research from Everest Group. This implies that the only plausible way to continue technological advancement will be to fund change initiatives with money saved by run-the-business initiatives.

“Capital markets firms are struggling with increasing costs, increasing regulation, and a period of low growth,” said Jimit Arora, partner at Everest Group. “In addition, technological advancement, especially digital, has created a new set of competitors that are not weighed down by the burden of legacy in their product portfolio, customer relationships and IT setup. The imperative for capital market firms is to focus on growth, profitability and managing risk, and their IT investment must be focused on cost optimization and improving the customer experience.

“As a result, the implications for IT service providers serving capital market firms are to tailor their offerings with next-generation technologies and offer utility-based services that help clients achieve their business objectives quickly. They also should look to collaborate with clients to invest in innovation and form alliances with leading platform providers.”

These recommendations and research findings are explored in two recently published Everest Group reports available at http://www.everestgrp.com/:

In the 2016 PEAK Matrix™ Assessment of IT outsourcing in global capital markets, Everest Group identifies seven Leaders among the 27 firms assessed: Accenture, Cognizant, HCL Technologies, IBM, Infosys, TCS and Wipro.

In addition, the report identifies five service providers—Capgemini, EPAM, Hexaware, Luxoft and VirtusaPolaris—as the Star Performers based on their positive forward movement over time in terms of both market success and capability advancements.

Other key findings in the reports:

  • Capital markets IT outsourcing spend remains the lowest among the subsegments of the banking, financial services and insurance (BFSI) industry.
  • New application outsourcing transactions in the capital markets IT services saw a minor decline of 2.6 percent compared to last year as clients reduced spending. Only 74 new deals were reported in 2015 against 76 in 2014. Cost pressures and global market uncertainty were the main reasons behind the decline in deal activity. The number of large deals decreased as clients undertook vendor consolidation to reduce spend on vendor management and reduce management overhead.
  • The number of large contracts jumped by 50 percent; however, total contract value (TCV) declined by 45 percent as clients reduced spending on traditional IT services.
  • Digital services continue to expand their share in IT budgets. Nearly 65 percent of all large transactions included digital components in the scope of services, with analytics and mobility being the leading technology themes last year as clients look to monetize data assets and improve customer experience using the mobile channel.
  • Renewals worth US$2.7 billion are up for grabs in the next year.
  • Fixed-price contracts remain the most preferred pricing model as capital market firms demand predictability in their IT spending.

About Everest Group

Everest Group is a consulting and research firm focused on strategic IT, business services, and sourcing. We are trusted advisors to senior executives of leading enterprises, providers, and investors. Our firm helps clients improve operational and financial performance through a hands-on process that supports them in making well-informed decisions that deliver high-impact results and achieve sustained value. Our insight and guidance empower clients to improve organizational efficiency, effectiveness, agility and responsiveness. What sets Everest Group apart is the integration of deep sourcing knowledge, problem-solving skills and original research. Details and in-depth content are available at http://www.everestgrp.com.

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Contact:
Andrea M. Riffle, Everest Group
andrea(dot)riffle(at)everestgrp(dot)com

Robert Cathey, Cathey Communications
+1-865-386-6118
robert(at)cathey(dot)co

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Robert Cathey
Cathey Communications
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