Spending on IT products and services in 2014 by Indian banking and securities companies will increase 10 percent to INR 470 billion from INR 426 billion in 2013, said Gartner.
Gartner said 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 with INR 155 billion in 2014 which confirms the focus of IT service providers on the banking industry. Several IT services providers are leveraging their global exposure within this domestic market.
Internal services such as the expenditure of banks for internal IT staff will grow 17.5 percent in 2014, said Gartner.
“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 Gartner research note said that 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, and new intangible channels such as mobile and the internet.
Gartner said network equipment and storage will grow 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 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.