IT vendors face stiff competition from financial services houses

Banks are always looking to make the most of their investments and a number are now selling homegrown technologies to increase their returns. The IT industry may find this difficult to deal with and the blurring of barriers between the two industries is likely to put pressure on an already challenged market.

‘Co-opetition’ is a term that is increasingly used these days to reflect the needs of companies to work with their competitors in non-competitive areas. Nowhere is this need greater than in the banking sector where competitors working together can achieve simplification of processes and cost cutting.

In part, this is a response to trends in the IT industry, where there are expectations of increased M&A activity among vendors. Banks are naturally concerned about whether products will continue to be supported for the foreseeable future. Many bankers have spoken publicly about the need to stick with the big IT players if they are to ensure such support. Others have set up shop themselves.

RBS and Dresdner Kleinwort Wasserstein are two cases in point. Not only are the banks producing their own technologies, but they are also selling them on to others in their market. As systems are typically homogenised when sold and customised on purchase, the competitive issue is less problematic than it might at first appear.

The Banker Technology Awards entries this year (see page 26) were marked by a massive increase in the number of entries from financial services houses. For vendors, customers that compete with them may be a growing concern. They will need to make sure they are right on the cutting edge to remain relevant.