where large banking and financial services institutions are headed — how it vendors can capture...

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TECHNOLOGY BUSINESS RESEARCH, INC.

Where Banking Organizations Are Headed

How IT vendors can capture opportunity

Technology Business Research Webinar SeriesAug. 1, 2013

TBR SourceIT℠ Reports

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2 TBR Webinar Series – SourceITSM | 8.1.13 | www.tbri.com | ©2013 Technology Business Research Inc.


Allan KransSenior Analyst, TBR’s Software [email protected] @allankrans

mailto:[email protected]

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Financial services organizations are looking to leverage IT to better address increasing competition and shifting customer expectations

“We want to reduce costs, improve efficiency, affect growth and ultimately improve shareholder return on investment. We can affect all of these things by making our project teams more effective in what they do.”

— Manager

Economic Variability

Increased Competition

Shifting Customer Demand

$55.8 billion in 2014 vendor addressable IT spend


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IT vendors can benefit from the simultaneous investments being made to maintain and change financial service business models

Investments reflect the balancing act between running the bank and changing the bank.

Large banking organizations are increasing investment in multichannel banking and data management to catch up with evolving customer demand.

Vendors must use an agile sales approach to adapt to the multiple influencers for IT decisions and the aggressiveness with which financial services firms are seeking to adopt new solutions.


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“Our IT investment strategy is increasingly becoming more practical, in that we are looking at new business models that we do not run fully in-house and on-premises. While we are not leading-edge, we are moving from lagging and ultra conservative to a more parity position, which I believe will evolve to become more leading in the next two to five years. Our IT platforms can become a competitive distinction, and if modeled correctly, can free our resources to work on higher-value tasks. That message is slowly becoming a known mantra. We are also very aggressive with proof-of-concept and pilot testing, to parallel new technologies. This has led to earlier adoption than if we had to make a full rollout decision up front.”

— VP Enterprise and Infrastructure, Banking and Financial Services, Large Enterprise, N. America

IT as competitive advantageWhere Banking Organizations Are Headed

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“The top external factors are threats from non traditional entrants to Banking (AMEX, PayPal etc.). Revenue pool is also being challenged by regulatory mandates (Durbin, Dodd Frank, FATCA Compliance, etc.).”

— Advisor, Banking and Financial Services, Large Enterprise, N. America

As revenues constrict and competition increases, banks are investing in emerging solutionsBusiness Summary What Respondents Reported

• Economic conditions• Competition and

business growth• Emergence of machine-

to-machine and mobile banking

• Government reforms such as Dodd-Frank Act (and Durbin amendment) and FATCA Compliance

External forces

• Banks are balancing investments on maintaining daily operations while investing and deploying data management solutions and mobile platforms to catch up with customer demand and market conditions.

• “Run the Bank” investments comprise the majority of fixed spending (~60% of IT budgets) and are focused on maintaining operations.

• “Change the Bank” investments, or discretionary funds (~40% of IT budgets), are comprised of primarily investments in emerging areas such as BI and analytics, mobile banking solutions and social media solutions.

How banking organizations react

What banking organizations see

• Increased demand for multichannel banking solutions (mobile/online)

• Declining revenue as a result of government reform

• Increased competition from new entrants to the market (e.g., Wal-Mart) and advanced competitors in mobile banking

SOURCE: TBR N. AMERICA, BANKING AND FINANCIAL SERVICES REPORT, SUMMER 2013


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Respondents: Workload Priorities for Discretionary IT Spending

Enabling business growth through application modernization and BI and analytics investments is top of mind for banks

Application investments and BI and analytics priorities reflect the urgency within the banking industry to modernize solutions to fuel business growth.


“Developing software that expands to our customers and aids us in our production is our main focus and drives our budget planning.”

— Manager, Banking and Financial Services, Large Enterprise, N. America

“We need to create user-friendly applications that allow our clients to take full advantage of our services, the mobile needs to simplify banking to encourage an easier and more direct interaction.”

— IT Manager, Banking and Financial Servies, Large Enterprise, N. America


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23% cc

77%

Banking IT investments are increasing across larger firms and smaller organizations in the spaceRespondents: Planned 2014 IT Budgets

$39.2M

1.6% $631K

$14.2M

2.2%$313K

Firms with 10,000+

employees

Firms with 1,000 to 9,999

employees

Average YTY Increase

Average 2014 Total IT budget

Average 2014 IT Budget:

$33.5M

Percentage of 1,028 firms in segment

Total IT budgets include:• Business Applications• Industry Applications• Productivity Applications

• BI and Analytics• Database and Middleware• Systems Management

• IT Infrastructure

• IT Professional Services• IT Overhead and Personnel

SOURCE: TBR N. AMERICA, LARGE ENTERPRISE RETAIL REPORT, FALL 2012


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Banks are increasing investment in data management and multichannel banking solutions in reaction to customer demands2013 TBR SourceIT Large N. American Retailer Model — IT Spending and Key Priorities

What vendors need to know:1. Though the majority of

banks (~75%) consider themselves aggressive adopters of IT, investment decisions are more reactionary as a result of customer demand for multichannel banking.

2. Multichannel banking is increasing need for regulatory, security and information management investments.

3. Maintaining operations while investing for the future is a key requirement for banks.

Optimize IT:• Business Performance

Management• Information Management

and Databases• Applications Servers/

Streaming• PC Operating Systems

Key PrioritiesNew Solutions:• Customer and Channel

Management Solutions• Mobile/Online Banking• Self-service Solutions

and Service Desk• Automation Solutions

Total IT Spend:$73.8 billion

Vendor Addressable Spend: 75.6%,$55.8 billion

Personnel and Overhead:24.4%,$18 billion



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Business Applications, $7.7 billion

Industry Applications, $3.7 billion

Productivity Applications, $5.3 billion

BI/Analytics, $5.7 billion

Database & Middleware, $6.8 billion

Systems Management,

$6.3 billion

Infrastructure, $9.2 billion

Professional Services,

$11.1 billion

Banking Organizations: IT Spending in 2014

SOURCE: TBR Large N. American Banking SourceIT Study; N = 201.

14%

7%

10%

10%

12%11%

17%

20%

The vendor addressable market is comprised primarily of fixed spending (60%) and discretionary projects (40%)2014 Vendor Addressable Opportunity Breakdown

Discretionary Spend in 2014 is$22.2 billion

Fixed Spend in 2014 is $33.6 billion

Vendor Addressable Opportunity is $55.8 billion Workloads

Fixed IT Spending in 2014

Business Applications $4.6 billionIndustry Applications $2.3 billion

Productivity Applications $3.2 billionBI/Analytics $3.3 billion

Database & Middleware $4.1 billionSystems Management $3.8 billion

Infrastructure $5.2 billionProfessional Services $7 billion

WorkloadsDiscretionary IT

Spending in 2014Business Applications $3 billionIndustry Applications $1.4 billion

Productivity Applications $2.1 billionBI/Analytics $2.4 billion

Database & Middleware $2.7 billionSystems Management $2.5 billion

Infrastructure $4 billionProfessional Services $4.1 billion

+3%

0%

+1%

+3%

+2%

+3%

+2%+3%



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$19,961

$20,332

$55$31

$0$17

$61$27

$80

$55$19

$28

-$1

$19,850

$19,950

$20,050

$20,150

$20,250

$20,350

$20,450

2013

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IT P

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Average Change in IT Spending for Banking Organizations 2013 -2014

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Respondents: 2013–2014 Bridge: IT Spending Growth by Category

Applications, infrastructure, back-office solutions and professional services will drive banking IT investment increases in 2014



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System upgrades and solutions investments to better leverage data are shaping banking investment decisionsRespondents: Hotspots and Top-of-mind Vendors

Top Targeted Workloads: Driven by LOB Largest Budgeted Workloads: Driven by ITArea Average 2014

Project BudgetTop-of-mind Vendors

Area Average 2014 Project Budget

Top-of-mind Vendors

Customer and Channel Management Solutions

$750,000 IBM, Microsoft, Equifax, Experian

Business Performance Management

$2,070,000 IBM, Microsoft, Oracle, SAS

Mobile/Online Banking

$1,470,000 Fiserv, IBM, Oracle

Information Management and Databases

$1,833,000 Microsoft SQL Server, IBM DB2, Oracle

Self-service Solutions and Service Desk

$881,000 IBM, Microsoft, Oracle, Pegasystems, Equifax, Experian

Applications Servers/ Streaming

$1,821,000 Microsoft SQL Server, Oracle, IBM Tivoli, Red Hat, Salesforce.com

Automation Solutions

$430,000 IBM, Oracle, Microsoft, HP, Experian

PC Operating Systems

$1,653,000 Microsoft

Top Priority Workloads Largest Core IT Workloads



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Total IT Budget (~2% increase YTY)

Banks are balancing investments in maintaining everyday operations with investments in multichannel banking growthRespondents: IT Spending Transitions

$$

“Change the Bank” Decisions• Evolutionary investments in emerging

solutions such as mobility, cloud, and BI and analytics

• Response to customer demand for multichannel banking is driving investments in mobile and online banking platforms.

Discretionary Budget (~40% of total budget)

Fixed Budget (~60% of total budget)

Regulatory Mandates, “Run the Bank” Decisions

• Ongoing IT maintenance expenses• Compliance investments in

workloads such as backup and recovery and security

“Decisions are separated from run the bank versus change the bank, with a new category for regulatory mandates that IT has to support (across the bank).”

— Advisor, Banking and Financial Services, Large Enterprise, N. America



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Respondents: IT Budgets by Customer Character

3.5% 74%

20% 2.5%

Aggr

essiv

e

Highly Centralized with IT

IT A

dopti

on A

ggre

ssiv

enes

s

Centralization of IT Spending

Highly Distributed Across IT and LOBs

Late

Ado

pter

Structured Go-getters

Laissez-faireBureaucrats

Empowered

The largest opportunity for IT vendors in the banking industry lies with aggressive, highly distributed purchasers of IT

Empowered banking and financial services organizations include companies that are highly aggressive adopters with highly distributed IT spending.

Structured Go-getters include companies that are highly aggressive adopters and have a highly centralized approach to IT spending.

Laissez-faire banking and financial services organizations are late adopters of technology, and their IT spending is highly distributed.

Bureaucrats include companies that are late adopters and have a highly centralized IT spending approach.

Average 2013 IT Spend: $23 million

Average 2013 IT Spend:$3 million

Average 2013 IT Spend: $20 million

Average 2013 IT Spend:$22 million

The majority of banking and financial services organizations are aggressive adopters of IT and show highly distributed IT purchasing behavior.

Distribution of Respondents by Character



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Path to Purchasing: Key Decision Makers

Line employees and senior-level IT employees are the gate keepers in qualifying for IT purchase consideration

Purchasing Scenarios Buying Criteria Purchase PlansKey Decision Makers Top-of-mind Vendors

Key Banking IT Decision Makers and Decision Making Process

Regular meetings (monthly, weekly) occur at the line and manager levels to constantly identify problems and potential areas of improvement through IT. Final decisions are also a collaborative effort, often by a committee that spans IT, LOB and finance groups within banks.

Line IT Employeesand

LOB End-users

Senior ITand

Business Managers

• Problem identification• Solution/vendor evaluation

• Business evaluation• Financing/resource

availability• ROI• Prioritization/urgency

Solution Qualification

Final Decision; C-Level, Finance, SVP

(Committee)

Collective, committee-based decision based on qualified/ prioritized solutions

“There are formal monthly review meetings to approve discretionary projects and reprioritize those already in flight (as needed).”

— VP Enterprise Architecture and Infrastructure, Banking and Financial

Services, Large Enterprise, N. America



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Recorded and Upcoming SourceIT Webinars

7/24 Where Public Sector Agencies are headed: How IT Vendors can capture opportunity

7/25 Where Telecom Service Providers are headed: How IT Vendors can capture opportunity

7/31 Where Healthcare Payers and Providers are headed:How IT Vendors can capture opportunity

Allan KransSenior Analyst, TBR’s Software [email protected] @allankrans



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Improve go-to-market returns by understanding a segment’s opportunity and the unique needs of buyersCY13

Appendix: TBR SourceIT℠ Report Overview

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SourceIT is a syndicated report program, offering clients the benefit of deep primary research at a fraction of the price of custom research.

SourceIT reports use a structured and repeatable research and report framework that enables client organizations to easily consume, compare and leverage the insights across multiple customer segments.

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Compare segments across multiple industries

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Leverage a syndicated program

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22 TBR Webinar Series – SourceITSM | 8.1.13 | www.tbri.com | ©2013 Technology Business Research Inc. SOURCE: TBR N. AMERICA, BANKING AND FINANCIAL SERVICES REPORT, SUMMER 2013

TBR’s SourceIT reports enable clients to more effectively capture business across specific customer segments

1. Understand and capture opportunityby comprehending buyer behavior in specific segments.

2. Improve GTM effectivenessby improving sales and marketing investment effectiveness.

3. Improve positioningby effectively targeting customer needs and managing competition.

SourceIT℠ ReportValue

Identify opportunities

Understand key business and IT strategy

opportunity drivers.

Capture sourcing and budgeting opportunities

across the stack.

Target decision makers

Understand purchasing scenarios.

Target key decision makers.

Improve positioning

See your position in a competitive landscape.

Manage positioning; Relationships versus

opportunity.

SourceIT reports help vendors better capture opportunity with their large enterprise buyers

Available Now: • Retail• Banking and Financial

Services• Federal and Public Sector• Telecom Service Providers• Healthcare Publishing 2H13:• Manufacturing• Energy and Utilities• Transport and Logistics


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Table of Contents3 SourceIT Methodology and Coverage

7 Executive Summary• Opportunity• Retailer Behavior• Vendor Selection

16 Market Opportunity• Total Market Opportunity• Average IT Budgets in 2013• Fixed Spending Priorities• Discretionary Spending Priorities

24 Discretionary Spending Across Workloads• Workload Priorities• Opportunity by Workloads

50 Banking and Financial Services Purchasing Behavior

• Investment Drivers• Paths to Purchasing for Key Priorities

66 Key Workload Case Studies• Customer and Channel Management

Solutions • Mobile/Online Banking• Self-service Solutions and Service Desk • Automation Solutions

87 Competitive Landscape• Purchasing Relationships• Vendor Footprint by Workload Category

for Fixed Spend• Vendor Footprint by Workload Category

for Discretionary Spend• Footprint by Workloads

90 Appendix

98 About TBR



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The 201 organizations in this report are large banking and financial services firms based in the U.S. and Canada

Commercial & Savings Banks, 34%

Credit Unions, 4%

Financial Transactions Processing, 26%

Reserve and Clearinghouse Services, 1%

Insurance (e.g. Business, Home, Life), 26%

Other, 9%

Respondent by Banking Organization Type


SourceIT Large N. America Banking and Financial Services Research Demographics and 2013 IT Spending



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TECHNOLOGY BUSINESS RESEARCH, INC.

About TBR

Technology Business Research, Inc. is a leading independent technology market research and consulting firm specializing in the business and financial analyses of hardware, software, professional services, telecom and enterprise network vendors, and operators.

Serving a global clientele, TBR provides timely and actionable market research and business intelligence in formats that are tailored to clients’ needs. Our analysts are available to further address client-specific issues or information needs on an inquiry or proprietary consulting basis.

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