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Pankaj Mishra
ET Bureau
Wednesday, October 7, 2009
BANGALORE: Indian tech vendors are set to gain from around $9.5 billion technology spend planned by the Royal Bank of Scotland (RBS) over the next five years, as up to $2-billion worth of back office and application development, maintenance projects could be outsourced to the Indian offshore suppliers including Infosys and TCS apart from the bank�s own IT captives in India.
RBS, which is owned 70% by the British government, aims to save around $4 billion in operational costs by 2011 by outsourcing non-core IT activities, integrating different technology banking systems and ensuring better focus on marketing initiatives. In a presentation made to Bank of America-Merrill Lynch investors last week, RBS chief executive Stephen Hester said that the bank has actually underspent on technology during past few years.
�Both in absolute ratio terms relative to our competitors, we have underspent on technology and we have also spent more of it of running the bank � dealing with lots of different systems inherited from past acquisitions � than changing the bank,� Mr Hester said.
When compared to other rival banks, RBS has indeed spent less on technology. Between 2005 and 2007, IT spend accounted for 7.2% of RBS� revenues, when compared with 8.7% of technology spend by its regional peers. According to the European Banking IT Cost Benchmarking study published last year, IT spend accounted for 12.8% of RBS� total expenses during 2005-07 , lower than the 16.4% allocated by its peers.
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