Will regional banks be changing their perception of IT (page 1 of 2)

The confluence of these market factors is driving significant changes in the way that technology enables banks operating in the Middle East to both serve their customers and meet their business objectives. In fact, the region is witnessing a monumental revision in the way that financial services providers are viewing the IT side of their businesses.

Changes in customer demand
Increasing Internet adoption across the region has created a fundamental change in consumers' relationships with their banking providers. Just as the Internet has encouraged a culture of instant access to information in a simple way, anytime, any place, anywhere, so Middle East-based customers are now demanding greater availability and simplicity in their financial transactions and information access.

While a growing number of banks in the Gulf and beyond have created an Internet presence to address changing customer needs, many of these systems are not integrated and don't offer real-time transactional capabilities.

The sophistication of customers has increased measurably, so regional banks must have systems in place that meet customer expectations about accessibility and functionality.
Rising IT integration costs

In the current economic climate, regional banks are closely evaluating the costs of IT as compared to the value that technology delivers to customers and the organization as a whole. Analysts have estimated that up to eighty percent of all new IT projects are actually integration efforts to try to make the new system or application work properly with the existing technology platform.

The growing trends across the Middle East toward multi-channel banking and increased customer focus are pushing up integration costs without any real benefit being passed on to the customers.

While some regional banks have invested heavily in integrated solutions that require minimal tailoring to fit their existing environments, a majority of financial services providers here are using obsolete core technology that costs more to maintain and is more difficult to integrate with.

There is good news on the way, however, to combat rising IT costs. New offerings such as Oracle's grid computing enable banks to virtualise software across multiple resources, allowing better and less expensive use of a bank's computing resources by balancing out peaks and troughs of activity, which are typical for banks - for example, end-of-day closing functions.

Low-cost hardware
While integration costs have increased for regional banks, IT hardware has become more affordable, marking a shift in IT investment patterns.

Middle East banks are demonstrating that they no longer require high cost platforms, and are increasingly deploying commodity hardware to run Unix and Linux, as the necessary computing power is now available at a more affordable cost.
A growing number of financial service providers are making the realization that the reliability and scalability elements of their IT environments reside in the software they select.

Accordingly, regional banks are increasing their software investments and reducing the amount of budget they must allocate to pricey hardware platforms, and the costs associated with systems maintenance and support.

Banks in the region are also demonstrating that they can attain greater levels of reliability using clustered systems and commodity hardware. This strategy drives out cost, and when combined with an operational customer database to store information, virtualizes resources and enables banks to run various activities across multiple hardware resources.

Evolving regulatory environment
Some of the most major changes in the region's banking industry are being driven by proposed regulation around records retention, capital adequacy and risk management, as well as global accords such as Basel II.