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TechnologyParadigmsforthe

BankingIndustry
TheEconomicTimesBankingTechnologyConclave

10September2009,Mumbai
57

IT Current Status Survey

KPMGandTheEconomicTimeshavecollaboratedtopublishthe'ITCurrentStatusSurvey'fortheBankingTechnology
Conclave2009.Informationinthissurveyisbasedondatareceivedfromthetopmanagementandtechnologyleadersof15
leadingbanksinIndia.Thesurveytriestoprobekeytrendsintechnologythatenablesbankingprocesses.Feedbackreceived
onfactorssuchascost,proposedtechnologyinitiativesandtechnologystrategy,havebeencollatedtobringthesesurvey
resultstoyou.

IT STRATEGY
1. IT Strategy

TheimportanceofITstrategyintheIndianBanking
Surveyed

sectorreflectsinthefactthatallrespondentstothe
surveyhaveundergoneanITstrategydefinition
exercise.MostconsidertheirITstrategytobewell
integratedwithbusinessstrategyandalsoperforma
reviewofITstrategyatleastonceayear. 0% 20% 40% 60% 80% 100% 120%

Reviewed at least once in two years


Reviewed Once in a year
Formally documented
Well integrated with Business strategy

COST REDUCTION
2. The key IT initiatives planned for
implementation by the Indian Banking sector

Applicationconsolidationandprocess/workflow 1
automationalongwithVirtualizationwerethetopcost
reductioninitiativeswith40percentofthe
respondentshavingaprojectlinedupoverthenext
0% 20% 40% 60% 80% 100%
oneyeartoaddresstheseareas.Storage
optimizationandvirtualizationweretheothertwo Application consolidation and process automation
initiativeswhichemergedashavingequal Virtuliastion
importance. Communication (including UC) and Network Infrastructure
58

Intheareaofstrategicgrowthinitiatives,mostbanks STRATEGIC GROWTH


havestressedupontheneedtoexplorebusiness
intelligenceasaninitiative.Otherinterestareasthat
toppedthisgroupincludeE-commerceandmobile
bankingaswellasfinancialinclusionrelated
1
initiatives.

0% 20% 40% 60% 80% 100%

Business Intelligence
Ecommerce, including Mobile Banking
Financial Inclusion related initiatives

BaselIIemergesasafrontrunnerintheinitiativefor REGULATORY COMPLIANCE


achievingregulatorycompliance.Projectsto
automateregularregulatoryreportingrequirements
alongwithpaymentsystemsrelatedprojectsarethe
1
otherinitiatives.

0% 20% 40% 60% 80% 100%

Basel II
Regulatory Reporting
Payment Systems

ITinitiativesrelatedtoEnterpriseRiskManagement RISK MANAGEMENT


andautomationofriskreportingtomanagement
emergedasthetopinitiativesonthedrawingboard
fortheyearahead.Assessingtheriskofoutsourced
1
processesmadeupthetopthreeinthisgroup.

0% 20% 40% 60% 80% 100%

Enterprise Risk Management (ERM)


Automating risk reporting
Assessing risk of outsourced processes
59

IT Current Status Survey

3. An overview of prevalent IT initiatives across the


Indian Banking sector
Core Banking Solution
Not Planned
CRM
DecisionSupportanalyticsforbusiness 0% 7%
Decision Support analytics
functions,BusinessIntelligence,Core 18%

8% 4% Business Intelligence
BankingandCRMaresomeoftheinitiatives 8%

17 %
thatamajorityoftherespondentshave %
4% 1% 11% ERP Financials
10

9%

9%
eitheralreadydeployedorcurrently HRMS

10
%
1 1%
8%

engagedinimplementationprojectsto Already Branch Virtualization

8%

6% 0%
implemented/
enable.ServervirtualizationandERMis under-way
Software-as-a-Service
aninitiativethatamajorityofthe Virtualization
respondentswouldbeimplementingina Document Management
coupleofyears.Amajorityofthe
Alignment to IT Security and Infra.Standards
respondentshaveindicatedthat'Software-
Enterprise Risk management
as-a-service'maynotbeontheiragenda.
Identity Access Management

Cloud Computing
Scheduled in
1-2 years

IT Capex Spend as a percentage of Revenue


4. Percentage of company revenues spent towards
IT Capex in 2008-09
> 5% <1%
8%
3-5%
DecisionSupportanalyticsforbusinessfunctions,Business 23%
Intelligence,CoreBankingandCRMaresomeofthe
initiativesthatamajorityoftherespondentshaveeither
alreadydeployedorcurrentlyengagedinimplementation
projectstoenable.ServervirtualizationandERMisan
initiativethatamajorityoftherespondentswouldbe
implementinginacoupleofyears.Amajorityofthe
respondentshaveindicatedthat'Software-as-a-service'may
notbeontheiragenda. 1-3%
69%
60

IT Opex Spend as a percentage of Revenue


5.Percentage of company revenues spent towards
IT Opex in 2008-09
<1%
15%
AmajorityofrespondentscommunicatedthattheannualIT > 5%
Opexspendwasaround1–3%ofrevenue. 31%

1-3%
3-5% 39%
15%

BUSINESS OPERATIONS
6.Top Technology related challenges that are
faced by Banks at present

Flexibilityofadaptingtechnologytobusinessprocessisthe 1
front-runningchallengeforITinbanks.

Drivingutilizationofapplicationsandchannelsthroughbetter
adoptionoftechnologyisthesecondchallengewiththe
0% 20% 40% 60% 80% 100%
reductionofmaintenancecostsforITcominginthird.

Adapting technology to business processes


Driving channel utilisation
Reducing IT maintenance overheads

Thetoptechnologychallengesareinkeepingupwithchanges REGULATORY COMPLIANCE


toregulatoryguidelinesandimplementingBaselII.

0% 20% 40% 60% 80% 100%

Implementation of frequent regulatory changes


Basel II compliance
61

IT Current Status Survey

FlexibilityofscalingupITcomputingcapabilitytomeetthe INFRASTRUCTURE UTILISATION


needsofbusinessisthetop-mostchallengefacedin
managingITinfrastructuretoday.Otherchallengesinthisarea
areinfrastructureutilizationandvirtualization.
1

0% 20% 40% 60% 80% 100%

Flexibility in Scaling up
Infrastructure utilisation
Virtualisation

7. Processes that banks have derived the most MOST VALUE FROM OUTSOURCING
value from, through outsourcing

1
TheclearwinnersinthiscategoryareATMmanagementand
cardservicesfollowedbynetworkmanagementservices.

0% 20% 40% 60% 80% 100%

ATM Management and Card Services


Network Management

8. IT processes being currently evaluated for MOST VALUE FROM OUTSOURCING


outsourcing

1
Datacentremanagementservicesrankthehighestinthis
segment.Otherprocessesbeingevaluatedincludeapplication
maintenance/supportservicesandITinfrastructure
monitoring/maintenanceservices. 0% 20% 40% 60% 80% 100%

ATM Management and Card Services


Network Management
62

IMPACT OF EXPECTED REGULATORY CHANGE


7. Processes that banks have derived the most
value from, through outsourcing Mobile Banking

Risk Management
TheclearwinnersinthiscategoryareATMmanagementand
cardservicesfollowedbynetworkmanagementservices.
Financial Inclusion

IFRS

0% 20% 40% 60% 80% 100%

H M L

Conclusion
Theseresponsesindicatethatamajorityofbankshavetakencognizanceoftheimportancethat
enterprisearchitecture,servicedeliveryandgovernanceplayinthedefinitionofabank'sstrategyforIT.
CapitalandoperationalexpenditureinITseemtobefollowingasimilartrend.Inmanyinstances,
importantchannelsofcustomeroutreachsuchasATMandcardservicemanagementhavebeen
outsourced,showcasingtheincreasinglevelsofcomfortwithrespecttotechnologyoutsourcing.
Challengeswithrespecttoadoptionoftechnologystillprevail.However,theimpactonITdueto
anticipatedchangesintheregulatoryenvironmentareexpectedtobeofamediumnature.
in.kpmg.com/btc

Contacts
Pradip Kanakia
Head - Markets
Tel: +91 80 3980 6100
e-Mail: pkanakia@kpmg.com

Kumar Parakala
Head - IT Advisory
Tel: +91 80 3065 4600
e-Mail: kparakala@kpmg.com

Abizer Diwanji
Head - Financial Services
Tel: +91 22 3983 5301
e-Mail: adiwanji@kpmg.com

Kunal Pande
Director - IT Advisory
Tel: +91 22 3983 6436
e-Mail: kpande@kpmg.com

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