Indian banking and securities companies will spend 470 billion rupees on IT products and services in 2014, an increase of more than 10 percent over 2013 revenue of 426 billion rupees, according to Gartner, Inc.
This forecast includes spending by financial institutions on internal IT (largely personnel), hardware, software, external IT services and telecommunications.
IT services is the largest overall spending category at almost 155 billion rupees in 2014 which confirms the strong focus on the banking industry by IT services providers, many of which are leveraging their prominent international exposure within this domestic market.
However, internal services (the expenditure of banks for internal IT staff) is forecast to achieve the highest growth rate amongst the top level IT spending categories - at 17.5 percent in 2014.
"The expansion strategy of banks is entering its peak in India with the release of two new bank licenses granted by the Reserve Bank of India (RBI) to IDFC and Bandhan Financial Services. There are another two dozen financial institutions still waiting for the same grant," said Vittorio D'Orazio, research director at Gartner. "The RBI will grant the license to those banks willing to penetrate the rural territory as RBI wishes to increase the bank penetration across the country. This opens opportunities for front-office technologies, such as branch-related hardware and software, but also for new intangible channels such as mobile and the internet. On the other side, we expect network equipment and storage to grow quite a bit in the data center technology segment while business process outsourcing (BPO) and IT outsourcing (ITO) will excel across the IT services line."
Core banking systems and other back-office technologies will also be affected by this trend as IT legacies are often unable to properly manage these new channels. This explains the estimated growth of 23 percent for the vertical specific software in 2014.