SOFIA (Bulgaria), July 21 (SeeNews) – IT spending in the financial services sector in Southeast Europe is on a slow recovery path and is likely to remain subdued over the near term with CIOs still under pressure to deliver growth on leaner budgets while getting maximum mileage out of legacy equipment, feedback from industry analysts and insiders indicated.
“This is going to be a longer process […] Many businesses were operating under a survival mode, which necessitated that people must 'do more with less' – an organisational mantra adopted during lean times that will probably be a key operational consideration for the foreseeable future,” Peter Hiekmann, Cisco vertical sales manager covering the financial services sector in CEE, Russia and CIS and the Middle East, told SeeNews in an emailed statement.
“Even from a go-to-market perspective, many businesses were prompted to explore new revenue channels and services and it seems they will permanently embrace new and more efficient ways of doing business.”
Elena Marinova, president of Bulgarian software solutions provider Musala Soft, does not expect IT budgets in the local financial services sector to recover to the pre-crisis levels anytime soon. “There is a new reality: CIOs are spending smart and striving to get more out of each IT dollar that they spend.”
In Bulgaria, recent regulatory changes have given some impetus to demand for IT products and services in the financial sector. One example in that respect is the insurance industry which has adopted an electronic system for the real time registration of mobile third-party policies developed by Musala Soft.
Marinova said the company is seeing rising interest among Bulgarian financial institutions towards smartphone applications. “Private users are already mobile and they are requiring better service and improved experience, anytime, anywhere. And this is reflected in their demands at enterprise level too. At the same time the price of mobile devices is dropping as functionality improves.”
Fujitsu Slovenia director Franc Trtnik concurs that downsized IT budgets are here to stay for the near term. “Our view is that financial institutions will once again start to invest in IT mostly in the year 2014.”
Trtnik pointed out that banks in 2011 are pushing through with IT projects that were planned in previous years, focusing on areas like outsourcing of IT development and infrastructure and deployment of open-source operating systems.
Still there are some bright spots in Slovenia like UniCredit Banka Slovenija which recently told SeeNews it is increasing this year its IT budget for the development, implementation and upgrade of online and mobile solutions and services.
Ljubljana-based financial services group ALTA Skupina is also braving the cutbacks in the sector, raising its IT budget for 2011 by 20% to 500,000 euro ($708,670). “Planned share of IT spending in the combined capital investment/operating costs of ALTA Skupina’s SEE units in 2011 equals 6.0%,” the group’s IT department told SeeNews.
The top priority in the group’s IT spending for the medium term is developing a platform for customer relations management. There are also tentative plans for some independent mobile application development and a mobile trading platform. “This area, however, is not a priority for the year 2011.”
According to OTP Banka Hrvatska managing board member Balazs Bekeffy, IT spending at group level within Hungary’s OTP has remained stagnant in recent years throughout the region. “In Croatia both CAPEX and OPEX in the IT field is nearly the same as in 2010.”
In the case of OTP Banka Hrvatska, the share of IT spending in the combined capital investment/operating costs is close to 20%, in line with other banks in the Central and Eastern European region but a bit lower than in the whole OTP Group, the official said.
After upgrading its core banking system in 2010, OTP Banka Hrvatska this year is focusing mainly on electronic services, card payment system and security. Internet and mobile banking applications are also a high-priority area with SMS services having already been upgraded earlier this year, an online banking upgrade underway and plans for the launch of a smartphone app later this year.
Hiekmann sees two key trends in the region: one is the optimization of the physical branch networks with investments in basic IT infrastructure, including voice and data networks, security and wireless technologies.
“This impacts both existing branches and new ones being added to branch networks. The expansion – which is slowly starting again – will also generate a more diverse design, i.e. including satellite branches and new branch experiences.”
This, in his view, bridges to the other trend, around investing into technologies which support customer services, acquisition of new clients, a better in-branch experience for customers, etc. “In this area, video technologies have a high potential: be it in the form of video-supported call centers, digital signs offering customized information, the availability of experts via video conferencing, etc. This second trend is still just starting in SEE, but we see an expectation from board levels on how IT can strategically support new business.”
The expert lists virtualization and cloud services, collaboration and business video and an optimized infrastructure to support business agility as the top priority areas in the IT spending of the region’s financial institutions this year.
“IT departments need to simplify their services and infrastructure, whilst at the same time there is a demand for innovations: i.e. through collaborative technologies to improve both customer experience and salesforce productivity.”
Among the subsectors of the region’s financial services industry, Hiekmann singles out retail banking as the traditional pace-setter in terms of IT spending and innovation. “Besides that, the insurance sector could be an early adopter in virtual desktop infrastructure and virtual datacenter infrastructures.”
($=0.7055 euro)
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