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Major US banks to outsource IT projects worth $5 billion to India
Major US banks to outsource IT projects worth $5 billion to India
By Chandan Das on February 15th, 2011
Even as the Obama administration continues to promote protectionist measures, a number of top banks in the United States are gearing up to outsource IT projects to the tune of $5 billion to India during the current year. According to an online report, the move to outsource IT and back office projects by these banks – Bank of America, Citigroup and JP Morgan – aim to reduce the expenses of conforming to the latest directives in the US as well as assimilate their banking systems.
Whereas JP Morgan Chase is pursuing its integration with its numerous acquired units, like Washington Mutual, Bank of America is amalgamating its banking systems with Merrill Lynch. On the other hand, Citigroup, which has already sold its captive units to Tata Consultancy Services (TCS) and Wipro, is now planning to cut costs further by offshoring projects to India. Another middle-level bank, Wells Fargo, which has bought Wachovia, is also endeavoring to pursue the integration from inexpensive foreign locations like India. In addition, Morgan Stanley too is pushing its IT incorporation with Smith Barney though outsourcing projects to vendors based in India.
The report quotes a CEO of an Indian tech firm as saying that while they suffered losses due to Lehman, they are now gearing up to ascend associating with American banks that have been successful in surviving the recent global economic recession and their government’s demands and interference and are currently in a position to make independent decisions as well as pursue success.
It is anticipated that these banks’ move to send more than 50 per cent of their integration projects to India-based vendors will help them to cut the costs involved in handling multifaceted M&A deals. In fact, the US government has been responsible for the recent decision of the country’s major banks to outsource its non-core operations to India. The government has been mounting pressure on these banks by making it mandatory to complete all M&A transactions within 18 months to two years.
In addition, implementation of more stringent reporting and acquiescence rules too has been responsible for such a move. TowerGroup, a leading research and advisory services firm in the US, says that the banks would be required to spend approximately $60 billion to cope with the stricter norms like the Dodd-Frank Wall Street Reform Act. According to Forrester principal analyst (offshore outsourcing and vendor management) Jan Erick Aase, now the banks are required to undertake plenty of reporting, which was not needed earlier, and this required updating technology. He says that the new regulations have become necessary owing to the numerous government bailouts in the recent times. Aase further said that banks that did not need government bailouts had plenty of merger operations and it is necessary to complete the incorporation within a maximum of two years.
The online report says that Cognizant and TCS are witnessing a surge in their revenues from the banking sector. In fact, TCS witnessed its revenues from the banking customers go up by 25 per cent during the quarter that ended on December 31, 2010. Similarly, Cognizant’s revenue from its clients in the banking and financial sector rise by 46.5 per cent during the corresponding period, while Infosys too witnessed a 4.5 per cent growth in revenues from this segment during the third quarter of the last fiscal year.
Major US banks to outsource IT projects worth $5 billion to India
Major US banks to outsource IT projects worth $5 billion to India
By Chandan Das on February 15th, 2011
Even as the Obama administration continues to promote protectionist measures, a number of top banks in the United States are gearing up to outsource IT projects to the tune of $5 billion to India during the current year. According to an online report, the move to outsource IT and back office projects by these banks – Bank of America, Citigroup and JP Morgan – aim to reduce the expenses of conforming to the latest directives in the US as well as assimilate their banking systems.
Whereas JP Morgan Chase is pursuing its integration with its numerous acquired units, like Washington Mutual, Bank of America is amalgamating its banking systems with Merrill Lynch. On the other hand, Citigroup, which has already sold its captive units to Tata Consultancy Services (TCS) and Wipro, is now planning to cut costs further by offshoring projects to India. Another middle-level bank, Wells Fargo, which has bought Wachovia, is also endeavoring to pursue the integration from inexpensive foreign locations like India. In addition, Morgan Stanley too is pushing its IT incorporation with Smith Barney though outsourcing projects to vendors based in India.
The report quotes a CEO of an Indian tech firm as saying that while they suffered losses due to Lehman, they are now gearing up to ascend associating with American banks that have been successful in surviving the recent global economic recession and their government’s demands and interference and are currently in a position to make independent decisions as well as pursue success.
It is anticipated that these banks’ move to send more than 50 per cent of their integration projects to India-based vendors will help them to cut the costs involved in handling multifaceted M&A deals. In fact, the US government has been responsible for the recent decision of the country’s major banks to outsource its non-core operations to India. The government has been mounting pressure on these banks by making it mandatory to complete all M&A transactions within 18 months to two years.
In addition, implementation of more stringent reporting and acquiescence rules too has been responsible for such a move. TowerGroup, a leading research and advisory services firm in the US, says that the banks would be required to spend approximately $60 billion to cope with the stricter norms like the Dodd-Frank Wall Street Reform Act. According to Forrester principal analyst (offshore outsourcing and vendor management) Jan Erick Aase, now the banks are required to undertake plenty of reporting, which was not needed earlier, and this required updating technology. He says that the new regulations have become necessary owing to the numerous government bailouts in the recent times. Aase further said that banks that did not need government bailouts had plenty of merger operations and it is necessary to complete the incorporation within a maximum of two years.
The online report says that Cognizant and TCS are witnessing a surge in their revenues from the banking sector. In fact, TCS witnessed its revenues from the banking customers go up by 25 per cent during the quarter that ended on December 31, 2010. Similarly, Cognizant’s revenue from its clients in the banking and financial sector rise by 46.5 per cent during the corresponding period, while Infosys too witnessed a 4.5 per cent growth in revenues from this segment during the third quarter of the last fiscal year.
