Outsourcing would cut 25% off IT budgets, says Datamonitor

Outsourcing would cut 25% off IT budgets, says Datamonitor

European retail banks should direct investment of IT budgets on customer relationship management (CRM), multichannel integration, e-banking, core systems and branch renewal, according to a new report from Datamonitor.

The research suggests that by outsourcing remaining non-core IT operations banks could potentially cut up to 25% off retail banks' annual costs.

Downward pressures are putting the squeeze on retail banks' IT budgets as decelerating loan growth, deterioration of credit quality and weakening mutual funds signal forthcoming diminishing revenue prospects within the industry, says Datamonitor.

The report says banks must choose those IT developments that can demonstrate a clear case of return on investment (ROI). For example, with 75 million European customers expected to bank online in 2005, retail banks need to continue to invest in e-banking, concentrating on front-to-back end integration, straight-through processing and process integration, multichannel integration and e-delivery platforms.

Similarly, continued investment in customer relationship management (CRM) projects is necessary to enhance performance and returns on sunk CRM costs, says Datamonitor. Branch renewal should leverage Web technology through the use of intranets and self-service Web stations.

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