IBS Journal February 2015
This is the time of year when IBS takes stock of what has been going on in terms of selections in the core banking systems market. The vendor submissions are coming in, the cross-checking has started and the IBS Sales League Table is coming together.
The main question will be whether we are finally seeing an upturn after consistent market shrinkage since the financial crisis. Of course, IBS has a feel for this already, given our focus on the sector throughout the year. And there are clues around, such as the financial results of the sector barometer, Temenos. As such, the latter’s sales warning in January ahead of its 2014 financial results will not have inspired confidence (see p9).
One early prediction is that yet more of the business will have ended up in the hands of fewer suppliers. This has been a clear trend in recent years and will only have been accentuated in the last year by yet more supplier consolidation. Unlike in days gone by, it shouldn’t be too difficult to predict who will be the best sellers in the core banking, wealth management and treasury and capital market sectors. If the bookies offered odds, they might have paid out some time ago in at least one of these areas.
At a fundamental level, the continued steep decline in sales has led to speculation in some quarters that the core banking systems sector as a whole is starting to disappear. Will the way forward become phased replacements rather than rip and replace, partly manifested in a shift of functionality to a more flexible, customer-centric middle office layer? It is feasible to see the core banking system suppliers themselves preparing for such a shift through the componentisation of their systems, even if the results of such strategies are often unconvincing. Breaking up one or more old, monolithic systems is easier to show on a Powerpoint than to achieve in reality.
The like-for-like replacement of core banking systems will not go away any time soon and a lot of the enthusiasm for phased migrations at present is probably less to do with this being the optimum approach for the business than it is with reduced risk and a focus elsewhere (regulations, channels, payments), plus perhaps the continued lack of new generation core systems.
The IBS Sales League Table, published in next month’s edition and unveiled at our webcast on Wednesday, 4th March, will help to answer some of these fundamental questions. Another reduction in the number of selections, despite improving economic conditions around the world, would add a lot of weight to the belief that the decline might have become structural rather than temporary. An up-turn, on the other hand, would suggest a return to happier days for the suppliers and would suggest that, as in the past, the health of the sector is pegged to outside economic factors.
After the disappointing sales in 2013, the evolving industry picture for 2014 will arguably be more eagerly awaited than ever before.
Tanya Andreasyan, Editor © IBS Intelligence 2015
www.ibsintelligence.com 5
editor’s note
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