For many years, the relationship between banks and their technology vendors has been richly rewarding and mutually satisfactory. The banks have had bloated IT budgets that the vendor community has been only too happy to relieve them of in return for all manner of systems and services. Indeed, for some years, the financial services industry has accounted for 20% to 25% of global IT expenditure, making financial services firms, second only to the public sector, a primary target of software vendors. But the recent financial crisis has put this long-standing relationship under strain.
The banking sector has, of course, embarked on cost-cutting exercises on several occasions during the past 20 years, at which times vendors would traditionally resort to selling the long-term value of electronic automation and straight-through-processing - unglamorous programmes that bring the undisputed benefits of increased efficiency, with a sizeable chunk of upfront investment. The recessionary malaise of the past 18 months, however, has proved to be more long-lasting and in many ways transformative than the blips of the recent past, and both banks and their vendors have had to seek out new approaches for distributing, consuming and paying for IT.
