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Copyright 2008 IDC. Reproduction is forbidden unless authorized. All rights reserved.
From IT Initiative to Business Strategy
Ricardo VillateResearch and Consulting Vice President
IDC Latin America
IT Trends in the LA Financial Services Industry
© 2008 IDC
Financial InsightsFinancial Insights
IDC company Established in 2002, from the merge of Meridien Research
and IDC's Financial Services Advisory Business
A Global Financial Services Research and Advisory Firm
© 2008 IDC
AgendaAgenda
• Finance industry in LA
• Top 10 Strategic Initiatives in banks
• Innovation
• Security
• Virtualization
• Customer Centricity
• Conclusions
© 2008 IDC
Latin America Financial Services Spending CycleLatin America Financial Services Spending Cycle
2001-2006: Growth at all costs
2006-2009: Growth but rationalized Investment
and improve efficiency and security
2009 - : Customer centric initiatives and improve efficiency
© 2008 IDC
Finance Industry in Latin America
© 2008 IDC
Finance industry proportion in Latin AmericaIT investments in the region will reach US$8.6 B in 2008Finance industry proportion in Latin AmericaIT investments in the region will reach US$8.6 B in 2008
54%
17%
5%
4%
6%
1%
5%
RLA = 7%
2008
Latin America IT Market = $ 54 Billion
Projected Growth 2008= 10.7%
2008
Total IT Market in FSI = $ 8,6 Billions
Projected Growth 2008 = 9,6%
16% of total IT Market
Source: Worldwide Black Book v. Q3 2007
Source: IDC LA 2008
© 2008 IDC
Typical FSI in Latin AmericaTypical FSI in Latin America
Average IT investment grows 9,6% in ’08 vs ’07
Up55%
Down25%
Same20%IT budget is going
75% PCPC penetration internally: 1.33 Employees per PC
1 serverserver for every 17 PCs or 22 employees
500 to750 GB of data storeddata stored per employee
1 in every 2 has deployed IP telephonyIP telephony
On average, 65% of employees have supported emailemail
CEO75%
COO12%
CFO13%CIO reports into
Growth55%
Cost red.24%
Reengin.21%
Agile13%Strategic focus on
Sources: IDC Latin America IT Spending Trends, 2008: IDC Latin America CIO Priorities, 2008;: Latin America Unified Communications Research, 2008
© 2008 IDC
FSI Spending in Latin America 2008FSI Spending in Latin America 2008
Hardware32%
Software21%
Services47%
Total IT Spending in Finance Industry = $ 8,6 Bn
Sources: Latin America Vertical Market Spending Patterns; Latin America Semiannual IT Services Tracker
Consulting, Integration & Development
34%
Deployment, Support & Education
33%
Outsourcing33%
Development & Deployment
Tools37%
Applications23%
Infrastructure40%
Pc's & Peripherals
45%
Networking29%
Servers & Storage
26%
© 2008 IDC Sources: Latin America Vertical Market Spending Patterns; Latin America Semiannual IT Services Tracker
Finance Industry IT marketGrowth in Latin AmericaFinance Industry IT marketGrowth in Latin America
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
2007 2008 2009
Gro
wth
Venezuela
Argentina
Peru
Brazil
Chile
Colombia
Mexico
RLA
© 2008 IDC
Build vs. Buy in Latin America FSIBuild vs. Buy in Latin America FSI
0% 20% 40% 60% 80% 100%
Business Process Mgmt.
App. Integration Server
Sys. And NW Mgmt.
Business Intelligence
CRM
ERP
Mobile Enterprise
Collaboration
Security
Internal Development Custom External Dev.
Packaged SW Outsourcing
46% of all Latin American financial companies in Latin America prefer to buy point technologies ‘off-the-shelf’ rather than integrated solutions
Likewise, from 36% to 65% prefer to develop their software rather than buy or hire an expert
This is because Latin America idiosyncrasy is one of ‘do-it-yourself’
It is higher for southern countries like Brazil, Argentina, Chile
Note: N = 107; single response – respondents are companies that say they will invest in said solution during 2008
QUESTION: Of the following IT solutions [you said you would invest in during 2008], please specify what type of IT Investments your organization will make:
© 2008 IDC
Disappointed with the returnon our investiment on IT
Mixed record with ourinformation technology
investment
Significant source ofcompetitive advantage
Steady contributor to ourongoing operation
effectiviness
CEO´s opinion of overall impact of IT on their companyCEO´s opinion of overall impact of IT on their company
Source: IDC LA Feb 2008CEO Priorities Survey n= 29
© 2008 IDC
CIOs may be Underestimating how Strategic IT is for the CEOCIOs may be Underestimating how Strategic IT is for the CEO
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Business IT
4 - Significant Impact
3 - Moderate Impact
2 - Minor Impact
1 - No Impact
Q: On a scale of 1 to 4, where 1 is 'no impact at all' and 4 is 'significant impact', to what degree is IT supporting the Top Business Initiative for your CEO?
© 2008 IDC
Store/branch office performance
Supply chain efficiency/improvement
Business performance monitoring
Product (or service) innovation/development
Efficiency improvement
Sales productivity/performance improvement
Customer care/customer service enhancement
Business initiatives that are leading the CEO's agenda in 2008 Business initiatives that are leading the CEO's agenda in 2008
Source: IDC LA Feb 2008CEO Priorities Survey n= 29
© 2008 IDC
Top 10 Strategic Initiatives in banks
© 2008 IDC
Global top 10 strategic priorities in banking – WW and Latin AmericaGlobal top 10 strategic priorities in banking – WW and Latin America
1. Information management: moving to
information life-cycle management
2. Technology refresh: quest for dynamic IT
3. Data security
4. Business process management (BPM)
5. Credit risk management: back to basics
6. Predictive analytics: building on a strong
foundation
7. Mobility: the next big thing?
8. Core banking renewal: gaining momentum
9. Green: conservation as competitive advantage
10. Channels: getting to customer centricity
1. Contingency, security and fraud
2. Architecture revision: dynamic IT
3. Risk management and compliance
4. Infra-structure consolidation and improvement
5. IT governance
6. Customer centricity, channels, increase loyalty
7. Operation centralization: global processes
8. Consumer credit/credit card/mortgage
9. Selective sourcing
10. Workflow-BPM - Digitalization
© 2008 IDC
0% 10% 20% 30% 40% 50% 60% 70%
Internet/Portal/Web
Dynamic IT Infrastructure.
Improvement of back-end operations
On-line collaboration between Bus
Manage growth of stored information
Real-time business performance monitoring
Mobility
Data integration
Compliance with regulatory requirements
Increase efficiency of existing IT infrastructure
LA banks major drivers for IT spending in 2008 LA banks major drivers for IT spending in 2008
Source: IDC LA Feb 2008 IT Investment Trends n= 56
© 2008 IDC
Security in LA FSI
© 2008 IDC
LA FSI overall level of confidence in their company's enterprise securityLA FSI overall level of confidence in their company's enterprise security
60%
10%
14%
19%
1 to 19 20 - 39 100 - 299 500 or more
Confident63%
Very confident
26%
Somewhat confident
11%
Source: IDC LA April 08Security Investment Priorities n= 27
How many serious IS security attacks has your company had in the last 12 months?
Level of confidence in the IS security in their companies
© 2008 IDC
0% 5% 10% 15% 20% 25% 30% 35%
Spoofing of corporate identity in an attack oncustomers
Flaw in network infrastructure
A denial-of-service attack
Other
Flaw in an operating system
Internal exposure
Flaw in a Web application
Attacks that caused the main problems in the past 12 months in LA FSIAttacks that caused the main problems in the past 12 months in LA FSI
Source: IDC LA April 08Security Investment Priorities n= 27
© 2008 IDC
0% 10% 20% 30% 40% 50% 60% 70% 80%
Lack of IT security experts within company
Difficulty of securing Web applications
Network management
Outsourcing security
Business exec. underestimate security
Mobility
Complexity of security solutions
Complying with regulations
Increasing sophistication of attacks
Employees underestimate security
Top security challenges LA FSI will face over the next 12 months Top security challenges LA FSI will face over the next 12 months
Source: IDC LA April 08Security Investment Priorities n= 27
© 2008 IDC
Reporting andmeasurement
Security awareness andtraining
Regulatory compliance
Governance
IT Infrastructureimprovement
Top security initiatives for 2008 Top security initiatives for 2008
Source: IDC LA April 08Security Investment Priorities n= 27
© 2008 IDC
Virtualization in LA FSI
© 2008 IDC
Service-Oriented
Architecture
Why Blades, Virtualization, and SOA Change the Economics of ComputingWhy Blades, Virtualization, and SOA Change the Economics of Computing
Virtual platform: Exploiting available physical resources and payment options to best serve a variable workload
EII: Delivering meaningful information from many sources to many consumers
SOA: Delivering IT functionality as reusable, interoperable, location-independent services
Autonomic: Self-managing, self-healing, self-tuning, self-securing
Dynamic IT: Giving users all the resources they need at the time they are needed, at a cost that is related to the business value delivered
VirtualPlatform/
Grid
EnterpriseInformationIntegration
AutonomicComputing
Dynamic IT:Enabling
Deployment ofConcurrentInitiatives
© 2008 IDC
Medium and Large Companies Reported a Virtualized 22% of their Server Installed BaseMedium and Large Companies Reported a Virtualized 22% of their Server Installed Base
Source: Latin America Investment Priorities Infrastructure Virtualization, 2008
Percentage of virtualized servers:
69%
8%
39%
11%
12%
6%7%
3%10%
x86 RISC EPIC
1% to 25% 26% to 50% 51% to 75% 76% to 99 100%
Question: Thinking of all the individual physical servers that you have installed, approximately what percent are virtualized, meaning they are partitioned into multiple physical or logical servers?
N=120 N=31 N=13
# of VMs or Partitions:
82%
48%
15% 18% 12%
10%
46%
34%
9%
5%
4% 6%6%
x86
RISC
EPIC
None 1 2 3 4 5 +
Question: What is the average number of partitions or virtual machines that you have on your virtualized servers?
N=120
N=31
N=13
None: Means they are using physical
partitioning
© 2008 IDC
0% 10% 20% 30% 40% 50% 60% 70% 80%
None
In-house Expertise
Technical Issues
Chargeback
Perceived as Risky
Costs/Budget
Tools/Management
Licensing costs
InstitutionalResistance/Issues
Skepticism
Vendor Support
LA
Virtualization Perceived as an “Easy to Implement” TechnologyVirtualization Perceived as an “Easy to Implement” Technology
Question: In order of importance please rank the 3 major challenges you faced in implementingimplementing virtual servers in your organization? [MULTIPLE RESPONSE]
2008 N=122
WW Results:
0% 10% 20% 30% 40% 50% 60%
None
In-house Expertise
Technical Issues
Chargeback
Time
Costs/Budget
Tools/Management
ImmatureTechnology
InstitutionalResistance/Issues
Vendor Support
2005 2006 2007
2007 N=405
Percent of Responses
Source: Latin America Investment Priorities Infrastructure Virtualization, 2008 / IDC WW Virtualization Study, 2006
© 2008 IDC
Customer Centricity in LA FSI
© 2008 IDC
Customer Analysis/Control of the BudgetCustomer Analysis/Control of the Budget Drive BI InvestmentDrive BI InvestmentCustomer Analysis/Control of the BudgetCustomer Analysis/Control of the Budget Drive BI InvestmentDrive BI Investment
What is the main driver for your organization to invest in Business Intelligence (BI) Solutions in 2007?Base=Will invest in Business Intelligence within the next 12 months, Only Financial Sector N=37
Source: IDC Latin America IT Investment Trends, Software, 2007
35%
3%
18%
47%
0% 10% 20% 30% 40% 50%
Implementcentralization ofcompany data
currently in silos
Use predictiveanalysis for
inventory/pricingmanagement
Implement balancescorecard
Betteranalysis/control of
the budget
Latin America
© 2008 IDC
Implement New Customer Service Implement New Customer Service ProcessesProcesses Drive CRM Investment Drive CRM InvestmentImplement New Customer Service Implement New Customer Service ProcessesProcesses Drive CRM Investment Drive CRM Investment
22%
23%
51%
17%
0% 10% 20% 30% 40% 50% 60%
Manage sales funnel/pipeline with newprocess/metrics
Better manage cross-selling/marketingcampaigns
Implement new customer serviceprocesses
Create/strengthen contact center
What is the main driver for your organization to invest in CRM Solutions in 2007?Base=Will invest in CRM within the next 12 months, Only Financial Sector N=30
Source: IDC Latin America IT Investment Trends, Software, 2007
Latin America
© 2008 IDC
Innovation in Banks in Brazil
© 2008 IDC
Innovation is Essential but EvasiveInnovation is Essential but Evasive
1.9
2.0
2.6
3.1
3.3
3.7
3.8
4.2
4.5
4.9IT should participate in innovation
Innovation will be essential for our survival
IT is too busy to innovate
There are people dedicated to innovation
Innovation is gaining momentum in the bank
Innovation is widely discussed in the company
IT is demanded to generate innovation
We wait others to innovate first
There are IT budget dedicated to innovation
We use collaborative innovation
Please indicate if you agree or not with the following statements: 1 = Disagree 5 = Agree
Source: IDC Brasil n= 35 Aug 07Brazil Business Needs and Its Impact on IT
© 2008 IDC
Innovation vs investment plans 2008 – banks in Brazil
0% 10% 20% 30% 40% 50% 60% 70% 80% 90%
Thin client
Smart cards
Full outsourcing
Digitalization
Client segmentation
VoiP
Digital certification
Virtualization
Teleconference
Biometry
Green IT
SOA
Mobile payment
IPTV
Mobile banking
Web 2.0
Investment plans
Innovation
Innovation vs investment plans – banks
Source: IDC Brasil n= 35 Aug 07Brazil Business Needs and Its Impact on IT
© 2008 IDC
ConclusionsConclusions
© 2008 IDC
Factors for FS companies to considerFactors for FS companies to consider
Risk Management More Important
2007-2010 A More Challenging Market
Reduce Back Office Costs
Sourcing remains important and will continue to rise for non customer related issues.
New IT-enabled revenue sources
Alternative channels showing signs of success
Clients are organizing themselves around community structures (eg MySpace, YouTube, Okurt).
© 2008 IDC
Customer centricity initiatives:Once again, the customer is kingCustomer centricity initiatives:Once again, the customer is king
Most FIs Still Lack a Single View of Their Customer
Drive Retention and New Customer Initiatives
On the Rise: Segmentation to Reach “Market of One”
© 2008 IDC
Financial Insights opinionFinancial Insights opinion
Although heavy IT investors Banks Vary Significantly in the Effectiveness of their IT Spend
FI s struggle to link IT investments to Business Value
Track records have not been great
FI want more out of IT for the same or less spend and will continue to invest selectively in long-term strategic initiatives.
© 2008 IDC
Two themes are really important
1. Development of New Business Strategies2. Reducing Costs
© 2008 IDC
Questions?Questions?
Please email me at:
rvillate@idc.com