In a year that could be easily termed as forget-table, one vertical shone through—the banking, financial services and insurance sector. The slowdown couldn’t dampen the enthusiasm with which the BFSI segment went about implementing IT. First it was the tech-savvy and cash-rich MNC banks that kept the flame alive—soon enough, PSU banks had begun to join in on the party, developing IT infrastructure to face increased competition. The end result—IT kept rolling along in a tough year, when most other sectors had put the clamps on spending.

Can’t do without IT
The BFSI segment has easily been the strongest example of successful IT deployment. And today, it has resulted in improved efficiency and enhanced customer services—mobile banking and ATM facilities— that are giving banks a competitive advantage. That IT is being given due weightage by BFSI players is underscored in their annual budget allocation—over 10% of the total expenditure at banks and insurance companies is going into IT implementation.

In totality, banks, insurance companies and stock exchanges make up the BFSI segment, but it is banking which has hogged the limelight, not only in terms of widescale deployment but also in terms of attaining large contracts from vendors. Only recently, TCS bagged a mammoth Rs 200-crore order from the State Bank of India Group (including smaller state-owned banks). Overall, SBI has outlined plans to spend Rs 500 crore on IT-enabling and connecting 30% of its branches countrywide.

The outstanding performance of this industry is attributed to a simple factor—as most major banks had their businesses computerized, their network inevitably became the backbone for all transactions. A minuscule loss of information could now result in huge transaction losses that translated into money, besides losing out on brand image. Because of this, it also became easier for vendors to pitch solutions like CRM, storage, security and banking tools to bank CIOs. It was not difficult for CIOs to convince the management, as such losses are easily quantifiable. Fiscal 2001-02 was an underperforming period for most segments, but banks and insurance companies looked for ways to improve efficiencies, and IT provided the perfect tool. More and more branches got interconnected, and businesses went online.

Private banks have been aggressively pushing their new products and services, and this has seen them eating up large slices of the marketshare of their public sector counterparts. PSU banks, which control about 65% of the banking industry today, are becoming increasingly aware of this aggressive assault on their territory. In anticipation, and to ward off private competition, PSU banks have finally got down to some serious IT plans—at the moment though, these initiatives are confined to the metropolises and larger towns. However, because private banks are free from certain bottlenecks, they have been able to scale up their network even in ‘B’ class cities.

As late entrants, private banks have had the advantages of working in fully automated work environs right since inception, and this has taken them at par with foreign players in terms of technology implementation and usage. Private sector banks can change quickly with changing market trends and demands—they don’t have to deal with cumbersome legacy infrastructure, unconnected branches or having to transform the pool of manpower resource, a problem that plagues public sector banks.

A clear reason that the slowdown had little or no impact on spend on IT by banks was that due to increased competition and the introduction of high-end services by IT-enabled banks, those moving slower could not afford to pull back the process of computerization kicked off earlier, before the first signs were felt. Also, since certain service offerings had been begun, they could not be suddenly discontinued. Concerns about security, in addition to the guidelines issued by the Reserve Bank of India, and globally recognized certification forced banks to deploy solutions like anti-virus software, firewalls and intrusion detection systems. Incidents like 9.11 in the United States increased awareness about disaster management and business process continuity—top players like Global Trust Bank, ICICI Bank and HDFC Bank went in for disaster recovery solutions. Most banks started investing on CRM, data-warehousing and data-mining applications. Others were seen actively integrating systems and networking their branches. And the march continues...

Team DQ