IT and business process outsourcing (BPO) are the fastest growing lines in the financial services sector, with at least seven 'megadeals' worth an estimated aggregate of more than $20 billion signed in the banking and credit industry in 2002, according to research from Gartner.
Susan Cournoyer, principal analyst for Gartner's IT services group, says many of the mega-outsourcing contracts involve the consolidation and centralisation of IT assets on a global basis, but they also represent planning ahead.
"Outsourcing providers promise to meet IT and business needs through new technology and new business models, particularly the on-demand model that appears to promise relief from fixed costs," says Cournoyer.
Gartner analysts say that while BPO has emerged as one of the fastest growing businesses in the financial services market, it is not a new service area - cheque processing services have been around for decades and payment processing showed steady growth through the 1990s.
But what is different now is that BPO is rapidly expanding into areas that were previously off-limits to outsourcing. This increasing acceptance is also driving expansion in the number and scope of deals, which in turn increases market size.
The reserch shows that strong technical skills and application expertise are the top factors in choosing IT services providers, in financial services and across all vertical markets. However, Gartner says costs are more important to IT buyers in financial services than in other industries.
Cournoyer adds: "Industry knowledge is also more important to financial services IT buyers, which likely accounts for the trend toward more in-depth verticalisation among top-ranked providers."