Banks Embrace Digital in More Than Half of ITO Deals in 2016—Everest Group

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Number of banking ITO deals including automation in scope increases nearly triple; a future of banking built on AI, open banking architecture, and cloud is imminent.

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Banks are reinventing themselves, leaving behind the legacy brick-and-mortar business model and becoming customer-centric rather than product centric

According to Everest Group, banks embraced digital in 54 percent of ITO deals in 2016, and the number of banking ITO deals including automation in their scope increased 175 percent. As banks increasingly leveraged digital across both front- and back-office, the demand for traditional IT services flat-lined. New technologies such as blockchain and artificial intelligence (AI) have witnessed significant traction, as banking enterprises explore various use cases. Seven new deals specifically for blockchain were signed in 2016.

Everest Group also reports that the number of automation deals with AI in their scope increased over 80 percent in 2016. Key themes for these deals included engagements for adopting virtual assistants, pilot programs to explore machine learning in the risk and regulatory compliance space, and pilot programs for cognitive robotic process automation (RPA).

However, banking ITO transactions overall showed a significant decline in 2016. The number of new deals signed dropped 27 percent, the average total contract value fell 24 percent, and the average deal duration declined 11 percent. An uncertain macroeconomic environment, political uncertainty, and an increase in insourcing by global banks attributed to the reduction in number of deals. An increase in automation and price competition among service providers impacted the average ticket size of deals.

“Banks are reinventing themselves, leaving behind the legacy brick-and-mortar business model and becoming customer-centric rather than product centric,” said Ronak Doshi, practice director at Everest Group. “In the near future, banks will become an ambient fabric, coordinating a network of allied businesses and third-party providers and orchestrating end-to-end customer experiences. The IT foundations of this new banking model are technologies such as artificial intelligence, API-enabled open banking architecture, and cloud. As our research demonstrates, we’re now seeing banks wholeheartedly adopting digital—a sure sign that the transition to the future of banking is rapidly accelerating.”

These findings and more are discussed in Future of Banking – “Experience First”: Banking ITO Annual Report 2017. The report contains insights into the future of banking and a comprehensive analysis of the banking application outsourcing market.

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.

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

Jennifer Fowler, Cathey Communications
+1 865-405-6380
jennifer(at)cathey(dot)co

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Andrea M. Riffle

Robert Cathey
Cathey Communications
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