UK bank IT spending to rise

UK bank IT spending to rise

Despite the implications of this year's global credit crunch, UK bank expenditure on software and IT services is set to grow at a compound annual growth rate of 7.7% between 2007 and 2011, according to a study by European research outfit Pierre Audoin Consultants.

However, as a result of the market pressures banks will be seeking to do more with the same resources and budget, which will lead to increased demand for offshoring services, says the consultancy.

Banks will look to lower cots by outsourcing horizontal processes such as finance and administration and human resources, as well as more core areas like mortgage and loans processing. Sepa payment processing may also be outsourced as some banks may not find it profitable to keep the process in-house, says Pierre Audoin.

But the consultancy warns that the recent market risk exposure also means that IT services providers will face tightening margins.

The rising use of multi-sourcing and offshoring services will also have a knock-on effect on larger players such as IBM and EDS.

Furthermore, vendors will face increasing cost pressure from the Indian players, such as TCS, Cognizant and Infosys, which are pushing hard to increase margins and growth in the UK banking sector.

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