INTRODUCTION

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Strained revenue growth, burgeoning costs due to litigations, and regulatory compliance continued to adversely affect the profitability of capital markets firms in 2013. This forced them to rethink and reinvent their business models as well as technological priorities. As a result, 2013 saw strong return of discretionary spend – led by investments in development of specific applications and platform-based utilities for regulatory compliance, data management, risk management, and digital initiatives (cloud, analytics, and mobility).

Consequently, the service provider competitive landscape is also intensifying as service providers continue to ramp up their capabilities, invest in innovative technologies, form alliances, and acquire strategic targets to address the growing and complex technology needs of banks and financial institutions.

In this research, we analyze the current trends and the future outlook for large, multi-year application outsourcing relationships for the global capital markets sector. We focus on:

• Trends in AO in the BFSI segment
• Market trends and activity for large AO relationships in capital markets
• Emerging priorities for buyers and key investment themes in capital markets AO
• Future outlook for 2014-15

The research also captures key movements in volumes/values of capital markets AO transactions, evolving trends, market dynamics, and emerging priorities of buyers in the last 12 months.

Scope of the analysis

• Industry: Capital markets (investment banking, asset management custody and funds administration, and brokerage services); excludes retail and commercial banking, insurance (life, annuity, pensions, and P&C), and healthcare payers
• Services: Large (TCV > US$25 million), multi-year (>three years), and annuity-based application outsourcing
• Geography: Global
• Sourcing model: Third-party AO transactions; excludes shared services or Global In-house Centers (GICs)

CONTENT

This report is structured across three key sections, each containing insights on application outsourcing in the BFSI and capital markets sector, with a specific focus on large-sized contracts:

• BFSI ITO market overview: Analysis of the overall BFSI IT Outsourcing (ITO) market and transaction trends:
• Market size and growth
• Adoption drivers
• Transaction characteristics (e.g., transaction volumes, value, frequency, and scope)
• Market activity and adoption trends (e.g., by geography, subverticals, and functions)
• Capital markets AO overview: Analysis specific to the capital markets AO industry with a focus on large transactions:
• Transaction activity and growth trends
• Demand characteristics for capital markets AO services by:
• Geography
• Line of business: Capital markets (asset management, investment banking, custody and fund administration, and brokerage)
• AO subfunctions
• Buyer size
• Offshore leverage
• Global delivery locations
• Renewal activity
• Emerging priorities of buyers and key investment themes in capital markets AO:
• Market dynamics and emerging priorities across the capital markets ecosystem
• Key investment themes
• Outlook for 2014-15

Some of the findings in this report are

• The BFSI IT market overview:
• The US$105-130 billion BFSI ITO market continues to be the largest industry segment of the global ITO industry. The number of BFSI outsourcing transactions witnessed a significant increase, which was driven by a resurgence in demand; TCV also registered a strong growth
• Majority of the BFSI ITO deals originated from EMEA (Europe, Middle East, and Africa). All the geographies witnessed a strong surge in deal activity
• Capital markets AO overview:
• IT spending for large capital markets firms witnessed a strong growth, driven by investments in technology for regulatory compliance and data management
• North America gained market share in terms of number of transactions, while APAC’s share grew in terms of TCV. Europe declined on both metrics in 2013
• Capital market firms with revenue in the range of US$5-10 billion witnessed a surge in spending as they strived for higher technological sophistication
• Key business priorities of capital markets firms during 2012 were cost reduction, standardization/rationalization, productivity improvement, improved time-to-market, and risk mitigation
• Key technology implications of these business priorities were: industrialization / adoption of the utility model, data management and governance, shift towards cloud / software as a service model, infrastructure modernization, and digital initiatives