The South African banking and financial services (BFS) sector is facing a number of global and domestic challenges, among them cyber security. As a result, the market for IT service providers has become highly competitive.
This is according to Frost & Sullivan's report entitled, ICT Enterprise Spend in Banking and Financial Services, South Africa, Forecast to 2019.
The study says to differentiate themselves from enterprises offering similar services, providers will need to offer innovative branding and price strategies, such as pay-per-use models and consider developing contracts with flexible service level agreements.
Frost & Sullivan says in 2016, ICT spend within the BFS sector was an estimated R15.1 billion, and is expected to grow at a compound annual growth rate of 2% reaching R16.0 billion by 2019. Major growth areas of ICT spending and IT strategy include - cloud-based services, industry-specific technologies and systems integration, it notes. Meanwhile, IDC predicts global financial services IT spending reached almost $480 billion worldwide in 2016 with a five-year compound annual growth rate of 4.2%.
"With service providers offering similar IT solutions and services to enterprises, differentiation through innovative pricing and branding strategies, as well as industry knowledge will be critical to success," says Naila Govan-Vassen, Digital Transformation senior industry analyst at Frost & Sullivan. "Enterprises will have more control over cost and the ability to implement innovative IT services should they adopt this approach."
Meanwhile, IDC predicts financial services IT spending will reach almost $480 billion worldwide in 2016 with a five-year compound annual growth rate (CAGR) of 4.2%
Govan-Vassen notes currently the banking sector's biggest dilemma sways between security versus innovation, and cloud versus cost saving and efficiency. "Although there is a general hesitance from the BFS sector to procure services from third-party vendors, due to risk management and security challenges, we see this as a critical step moving forward.
"This is predominantly due to the fact that the market is forcing the implementation of innovative cloud-based and real-time data gathering and monitoring systems when it comes to systems integration."
Ken Research notes globally financial institutions are increasingly turning towards relatively new ICT technology like cloud computing to keep up with the demand of the internationally connected marketplace. The global IT spending was expected to reach $500 billion by 2016, it adds.
The highest portion of financial market institutions' external investment sits within hardware, software and IT services, demonstrating the need for efficient IT systems security, along with software licences and applications, says Ken Research.
Also, the growing demand for ICT governance and new regulatory requirement is driving the industry to invest more in ICT, it adds.
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