Despite tensions between India and Australia, Down Under banks are sending more business to Indian outsourcers
Even as Australia is making headlines for hostilities towards Indians, Australian banks are set to implement billions of dollars worth of IT projects and could also outsource many of their functions to India.
Some of its top banks are looking to implement core-banking projects, and the first of these projects from the National Australia Bank has already gone to Oracle Financial Solutions, earlier i-flex Solutions.
These projects could range anywhere from $2-$4 billion, with the software licences alone costing $500 million. Unlike the US, banks in Australia are still very profitable. "Many of these banks are running applications on legacy systems and hardware that may not be supported anymore. They are shifting to core banking applications and awarding contracts for their implementation," said Tim Sheedy, senior analyst, Forrester Research. One of Australia's big four banks, Commonwealth Bank, is also in the midst of a core-banking modernisation programme, while two of the other big four banks are also in similar discussions with vendors. These banks are looking at outsourcing their entire IT to select functions such as monitoring and maintenance, said Mr. Sheedy.
The banks are outsourcing out of necessity to cut costs and move from a variable cost model to a more predictable cost model, he said. The findings of a report yet to be released by Forrester, show that the outsourcing is staging a comeback in Australia. "Australia had moved away from outsourcing but now cost is driving them to it again.
Australian banks have never outsourced but are now starting to. The outsourcing contracts that come up could be in hundreds of millions of dollars," he said.
So, although IT budgets in the Asia Pacific are shrinking by an average of 9%, outsourcing has increased. "The banks are doing it to save money. So we will see a considerable offshoring component because price will be a key consideration," said Mr. Sheedy.