Indian IT can count on US banks’ tech spend plans

JP Morgan, BoA & Citigroup to increase tech spends in 2020, despite a short-term blip

Agencies
The increased spend on digital technologies by US banks will benefit Indian IT outsourcers, as they rank among their top clients, analysts said.
MUMBAI | BENGALURU: Indian IT services providers including Tata Consultancy Services, Infosys and Wipro may benefit as global banks such as JP Morgan, Bank of America and Citigroup are set to increase technology spends in the year ahead, analysts said, even as they face a short-term blip in discretionary spending due to the Covid-19 virus outbreak.

JP Morgan’s annual report for 2019, released on April 6, disclosed that it would increase its technology spend by 4% over last year despite the pandemic. Of this, 50% would be dedicated to ‘new’ capabilities. The annual report commentaries of Bank of America and Citigroup also suggested that their investments in digital initiatives will increase efficiency and reduce costs.

Citigroup told ETin an email that it had outlined its technology spend in its annual report and would continue to invest in digital as the impact of the outbreak is clearly accelerating digital usage further. JP Morgan declined to comment, while Bank of America did not respond to an email.


The increased spend on digital technologies by US banks will benefit Indian IT outsourcers, as they rank among their top clients, analysts said. “Revenue headwinds posed by Covid-19 should further drive the need for such efficiency improvements and cost savings,” Sudheer Guntupalli, Mohit Sharma and Heenal Gada, analysts at Motilal Oswal Financial Services wrote in a note last week.

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“Firms may also show an increasing propensity to offshore IT services work to low-cost locations like India in pursuit of cost rationalisation,” they said.

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Early investments in digital capabilities were aiding customers of the global banks in remote banking, they said, as social distancing becomes the new norm. Technology investments to drive cost cuts will present new opportunities to Indian IT companies in the coming year, said Peter Bendor-Samuel, CEO of US-based IT advisory and research firm Everest Group. “There are some potential integral signs that there may be an increased need for savings coming out of the crisis and this could drive some interesting growth for the Indian firms,” Bendor-Samuel said.

Companies also remain cautiously optimistic about other gains, including vendor consolidation in the BFSI sector. “There is, obviously, an impact in the mediumterm. I think there is a big opportunity in terms of vendor consolidation. So, from our perspective, while the future is very uncertain and it’s difficult to predict, we are staying close to our clients, we are working with our clients very, very closely,” said Angan Guha, global head of BFSI at Wipro.

Infosys expects more banks to shift their applications to the Cloud and the emergence of pure digital banks will help grow business.

“After Covid-19 we expect a strong opportunity for Cloud, Data Services and creating new digital bank capabilities,” UB Pravin Rao, chief operating officer at Infosys told analysts.
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