Typically, in a merger between banks, IT spending on application migration and testing ranges from 0.25 per cent to 0.5 per cent of the new entity’s combined revenue. It might be less in the present case. “The current move has been taken up after careful analysis of synergy in technology stacks. All the to-be-merged entities are using similar versions of the core banking platforms. So, the IT spend will be lesser than in the case of differences,” explained the IT head of a PSB, who wished to not be named.
In fact, while announcing the proposed merger, the government had said that synergy in technology was a criterion in the decision. For instance, United Bank of India, Oriental Bank of Commerce and Punjab National Bank use Infosys’ banking software, Finacle, for their Core Banking Solutions.
Similarly, both Syndicate Bank and Canara Bank use Oracle’s i-flex in this regard. Allahabad Bank and Indian Bank both use TCS’ banking platform, BaNCS. Andhra Bank, Corporation Bank and Union Bank of India all use Finacle.
In some cases, the key IT services vendor is also the same, which would ease the integration process. For instance, IBM is the lead technology vendor for both Canara and Syndicate Bank.
According to global research firm Gartner, the spending on IT services in India is around $15 billion (nearly Rs 1.1 trillion). Of this, 30 per cent comes from the banking, financial services and insurance (BFSI) vertical. Traditionally, global IT services entities like IBM and Accenture have had an upper hand in the Indian BFSI market as compared to Indian counterparts. This is because financial institutions see the former as one-stop destinations, able to provide consulting to application-related services.
“Indian IT firms have never actively pursued the domestic BFSI sector, except the platform business. However, this is certainly going to change, as the size of IT outsourcing
contracts is likely to increase with the emergence of bigger banks.
If multi-year deals start to touch $100 million, then Indian IT firms will give a tough fight to global players, going ahead,” said Jain of Pareekh Consulting.