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Banks face tough year but IT spending still positive
- — 19 February, 2013 20:52
Banks in Asia Pacific are expected to grow IT spending by 8.8% in the coming year according to IDC Financial Insights. This is higher than the 7% growth experienced during 2012, noted Michael Araneta, consulting and research Director for IDC Financial Insights Asia/Pacific.
He expects the growth to come mainly from retail banks while investment banks face continued global cost pressures. "The retail banks in this region are in fact raising spending as there is still plenty of upside in the emerging markets here," noted Araneta.
These emerging markets consist of Indonesia, Thailand, Malaysia, Philippines as well as the huge potential in India and China. On one hand there will be major investments by banks that Araneta terms as "super regionals'--the large banks that seek to become significant regional players--such as ANZ, Commonwealth Bank, CIMB, who are vying with established regional players like HSBC, Standard Chartered and DBS.
"These super-regional banks have clear five-year plans to expand across the region and will be the big spenders in years to come with core-banking platforms, region-wide application rollouts and standardisation programs," said Araneta.
In the more mature markets of Singapore and Hong Kong the growth will be limited but investments are still being made. "We see a big emphasis on regulatory and compliance initiatives while demands on managing operational risk and financial risk are also on the rise," said Araneta.
He also expects Singapore to continue its position as a regional hub for banking IT which will see more operations shifting resources there.
In Hong Kong the banking outlook is also positive overall, with Gartner predicting a 4.1% increase in IT spending. Again this is being driven more by the retail sector with one Hong Kong banking CIO noting that the bank's IT spending outlook is quite positive in light of the predicted China rebound for 2013.
The Hong Kong CIO also noted significant challenges from rising competition, new demands from regulators as well as emerging industry standards that all require IT investments in order to properly address them. Data quality is an area that is being identified a big area for attention this year as so many operations are dependent on correct, relevant and accessible information.
"One fear is that there is an overlapping in these emerging demands which results is unnecessary costs and resource--a more consolidated and holistic strategy to deal with these industry trends is required instead of the current siloes of requirements from many different industry bodies."
On the investment banking side, the big players are all in cost-control mode. "Overall investment for the mature markets like Hong Kong is flat, but Asia as a whole is likely to see some growth," said Ashok Kalyanswamy, CIO, Asia Ex-Japan and Head of APAC Equities and Prime Services Technology at Nomura.
The emerging markets are still big opportunities for the securities players and as a result Asia is still seen as growth area versus the other regions.
As a technology leader within this sector, Kalyanswamy is very focused on the company's current cost base. He admits that most banks are still in recovery mode after the traumatic market changes in the last year and the bank is striving to find a cost and operating model that will provide sustainable profits.
"We must find a model that delivers more than just one year of profit and that requires moving away from the big boom and bust investment cycle," he noted. "We are rethinking operating models and looking beyond just making simple cuts but look to create an efficient and dynamic cost base that allows the bank to perform at optimal efficiency at all times and be able to scale when markets dictate," Kalyanswamy added.