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India Banking/Financial SMBs To Spend $1.24b On IT Infrastructure In 2009

Higher adoption of web hosting and development among Indian banking/ financial SMBs acts as a key growth-driver for the sector, says AMI research

According to a recent study by New York-based Access Markets International (AMI) Partners, SMBs in India (small and medium businesses or companies with up to 999 employees) in the banking/ financial sector are on track to spend $1.24 billion in 2009 on their overall IT infrastructure, up by about 3.5% over 2008.

Significant growth can be observed in the field of broadband, intranet, website hosting, and website development. This includes expenditures on intranet, website development, and website maintenance. SBs (small businesses or companies with up to 100 employees) have shown a spending increase of 13.4% over the last year on web hosting and development—while MBs have shown a year-over-year rise of 8.7% in expenses. Another noticeable trend is the increased outlay on storage services; this includes all storage-related services provided by third-party service providers or channel partners and includes installing & maintaining storage systems, offsite backup and archiving. This has risen by 8.5% over 2008.

Alankar Joshi, Research Analyst at AMI Partners, said: Spending on external Internet service providers for hosting their websites, third-party consulting, and contracts for maintenance of websites is on the rise among Indian banking/ financial SMBs. Some of the major drivers that contribute to the growth of IT adoption among Indian banking/ financial SMBs include increasing customer expectations, compliance and regulatory policies, competitive scenario and increasing security threats.”

Reportedly, independent software vendors (ISVs) are playing a major role in developing customized solutions specific to banking/ financial sub verticals. Most of the SMBs are opting for these customized packages to save cost, streamline their complex & critical operations and to maintain better connections with their customers. Most of the bigger IT vendors are associated with these ISVs and a successful business transaction acts as a win-win situation for both. For ISVs, such tie-ups ensure financial backing and wider reach to a greater client base. It also helps them test out new products and they also gain discounts for using vendor platforms to develop applications. For the large IT vendors, it saves them the cost of developing small, niche applications, or solutions and helps them enhance local partner networks. Value-added resellers are also playing a major role in most of the tier 2 and tier 3 cities in fulfilling the IT requirement of banking/ financial SMBs.

However, AMI has found that some of the roadblocks for the adoption of advanced technologies within banking/ finance SMBs are higher cost of implementation and concerns about return on investment (ROI).

AMI-Partners specializes in IT, Internet, telecommunications and business services strategy, venture capital, and actionable market intelligence — with a focus on global small and medium businesses (SMBs), and extending into large enterprises and home-based businesses.