Financial services firms in Europe will invest EUR100 billion on software and services related to the renewal of their banking applications over the course of the next ten years, according to a report by Forrester Research.
Although financial institutions are decreasing their overall IT spending, Forrester says banking platform renewal is mandatory. The survey of IT decision-makers at 64 European financial services firms across 13 countries found that 46% of banks have already allocated budget and started to renew banking platforms, while a further 23% have concrete plans to do so in the future.
More than two-thirds of the 54% of banks that have not yet started renewal initiatives — about 37% of the total — state that they will start projects by 2010 at the latest.
Forrester says the cost for different firms varies strongly, ranging from EUR5 million for a relatively small bank to EUR250 million for a tier one firm.
As a result, Forrester estimates banking software vendors and IT services companies tapping into this market may enjoy more than EUR10 billion in revenues over the next couple of years.
But although banking platform renewal is a big opportunity for vendors, most banks will opt to purchase off-the-shelf products and integrate systems themselves. Jost Hoppermann, VP, financial services, Forrester Research, says vendors have to prove their products can interoperate with third-party applications.
"Without an all-encompassing approach that goes beyond selling a current account application, an integration of multiple back-end applications, and even a complete banking platform, vendors will not be in a position to take advantage of this multibillion-euro opportunity," says Hoppermann