How far can it go?
The relationship between large banks, financial services firms, and insurance companies – sometimes simply known by the acronym BFSI – and large IT services and outsourcing firms, like Tata Consultancy Services (TCS), Infosys, or Cognizant Technology Solutions (among several others), has become increasingly and consistently cozy and pervasive over the past decade or so. In the rearview mirror, this development makes total sense. We all now live in a perpetual “more for less” environment. And, if you can’t achieve more-for-less, at least approximate the same functionality for less.
So, with BFSI caught in a brutal post-GFC vice represented by unprecedented regulatory pervasiveness on one side and a lowest-rate, lowest-volatility market environment on the other, it makes total sense that a ton of legacy infrastructure, legacy software maintenance, and select semi-skilled, labor-intensive processes have gradually been offloaded to lowest-cost purveyors of these types of services.
Clearly, this play has been quite popular. Though BFSI is certainly not the only client sector for global IT services – in fact, the diversity across sectors is broad, from logistics to hospitality to manufacturing to healthcare – it has become the largest, growing from 25.4% of IT services revenues in 2005 to 30.9% in 2016 (see Exhibit below).
Now, let’s ask again: How far can it go? And, perhaps, more importantly, to what end?
Alphacution will be exposing more of its findings, modeling output and observations about the global IT services sector – and its impact on BFSI – as we roll out our first IT Services study over the coming days and weeks. Stay tuned…
As a quick bonus, the exhibit below showcases the dataset that we developed to support that upcoming study, specific modeling output for which has already been published to our subscription-based premium exhibit library: