BFSI investments in IT, ITeS sector to cross $3.5 bln by 2010

New Delhi, June 5 (UNI) Banks and Financial Institutions (BFSI) across the country are expected to invest more than two billion dollars by the year-end in IT upgradation.

According to analyst firm Skoch Consultancy, areas like customer relationship management (CRM), human resources management (HRM), business intelligence and data mining kind of applications and services will invite higher investment than the traditional core banking software.

Spendings on core-banking software packages grew less than 10 per cent, while still accounting for more than 50 per cent of the packaged software spending of 263 million dollars in 2006.

''With most core-banking packages offering similar functionality, one of the reasons for higher growth rate in applications like CRM, HRM is that they are now considered critical for cross selling, avoiding customer churn and differentiating brand and product offerings,'' said Skoch Consultancy Chief Executive Officer Sameer Kochhar.

The seriousness that banks have shown in enhancing the IT infrastructure can be seen from the fact that while they spent about 1,764 million dollars in 2006, an estimated 2,078 million dollars is expected to be spent by the year-end, registering a growth of 18 per cent.

''We expect that by 2010 the investments in the areas like IT, IT applications and services will cross 3.5-billion-dollar mark,'' he added.

Out of the 1.7 billion dollars, about 863 million dollars was spent on hardware, 263 million dollars on packaged software and 820 million dollars in services last year.

Investments on hardware is estimated to be 797 million dollars, 305 million dollars on packaged software and 976 million dollars on services this year, according to Skoch Consultancy .

''With enhanced mergers and acquisitions, middleware that is crucial to make heterogeneous systems in the banks to work together will become a growth driver in addition to security, mobility and non-core banking applications like CRM,'' he added.

Further, as the banks and financial institutions try to reach the rural areas, they will have to depend heavily on partners as correspondents or facilitators. Micro-credit institutions and non-banking financial companies (NBFC) are expected to see a high degree of IT spending not just for automation but also cut down transaction costs for reaching financial services to the hinterland.

UNI