Bank IT spend to rise despite credit crunch crisis

As the UK banking sector steadies itself in response to the US sub-prime mortgage crisis, IT suppliers will be pleased to learn tech spending in the sector will rise over the next three years.

Software and services spend in the sector should rise by 7.7 per cent between 2007 and 2011, according to Pierre Audoin Consultants (PAC). Most of that investment will go into outsourcing deals, especially business process outsourcing (BPO).

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In a statement, the research house said: "As a result of market pressures banks will be seeking to do more with the same amount of resources and money, which is likely to translate into increased demand for offshoring. BPO will be particularly demanded for processes such as finance and accounts and HR, as well as more core areas like mortgage and loans processing as banks seek to lower costs."

PAC went on to say the introduction of the single euro payments area from next year will also be a driver to outsource as some banks find maintaining such payments in-house will not be profitable.

This means the real winners in the UK banking sector are likely to be Indian suppliers such as Cognizant, Infosys and TCS. Larger IT services companies such as EDS and IBM may see revenues fall away, the report said, as banks opt for smaller contracts.