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April 15, 2009
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Despite the global economic crisis, the ndian banking sector has shown considerable resilience. While a few segments have been impacted, overall, the sector has witnessed normal growth.

According to research firm, India Brand Equity Foundation, banks in India posted strong income and profit figures in the October-December 2008 quarter owing to high credit growth and easing of yield on government bonds. On a year-on-year basis, top Indian banks increased their earnings by almost 40 per cent during the quarter. The financial services segment also charted a strong growth course owing to sustained regulatory measures and introduction of new products and services.Moreover, the banking, financial services and insurance (BFSI) sector has a major share in India's outsourcing industry. In 2007, it accounted for 38 per cent of India's outsourcing market worth $47.8 billion.

The growth is expected to continue.Market research company RNCOS predicts that the Indian banking sector will expand at a compounded annual growth rate of around 23.3 per cent till 2011. Also, according to research data from investment advisory and financial services company Macquarie, India is currently the most preferred stock market in terms of portfolio allocation owing to lucrative valuations and fiscal measures taken by the government to boost liquidity in the economy.

Aiming to tap the lucrative opportunities promised by such growth, companies in the BFSI space are pulling out all the stops to further automate their business processes. In fact, given the increasing competition, establishing a robust communications infrastructure has been at the top of most BFSI companies' to-do list for a while.The incorporation of IT and telecom systems has changed the face of banking in India. For customers, long queues in front of teller counters have given way to an automated environment with 24-hour ATMs, credit cards, debit cards and internet banking. Facilities like seven-day branches and round-the-clock call centres have also added significantly to customer convenience.

The communications infrastructure at banks itself has evolved from an independent, stand-alone communications set-up for each branch to a fully networked backbone. Today, banks no longer work in information silos. Rather, they can boast of complete connectivity with their zonal or regional offices via leased lines, wide area network (WAN), integrated services digital network (ISDN), multi-protocol label switching (MPLS) network, etc. These components help create a network on which information and data can be stored, transferred and accessed by bank employees irrespective of their location.

Applications such as core banking solution (CBS), enterprise resource planning (ERP), customer relationship management (CRM), etc. are being used to facilitate "anytime, anywhere" banking.While a CBS helps customers access and operate their accounts from any location, ERP and CRM facilitate better enterprise management, improved performance and better efficiency for banks.

The mobile handset has become a popular banking medium. For example, ICICI Bank's iMobile platform helps customers transfer funds to ICICI and non-ICICI bank accounts using their mobile. The application can be used by Banks no longer work in information silos. Instead they boast of complete connectivity with their zonal or regional offices via leased lines, WAN, ISDN, and MPLS networks.customers having savings accounts, demat accounts, credit cards or loan accounts.Users can also pay their utility bills and insurance premiums using this facility.

Insurance companies, whose IT and telecom infrastructure needs are similar to those of banks, have also upgraded their communications set-up to include top-ofthe-line technologies. Internet and mobile services have played a vital role. Most insurance companies have developed web portals to provide enhanced services to customers.Users can register themselves online to view their policy status using their PIN number and access all the relevant information. Integrated SMS gateways, which allow customers to obtain information by sending keywords to a predefined number, have also been developed.

Most companies have also adopted iCRM, an internal helpdesk software that can be used to log complaints and service requests. Helpdesks to provide 24x7 support to customers across the country have also been set up.

The SMS gateway is also used extensively to send messages from the head office to the branch offices and the field staff. This has helped top executives to communicate easily with the field staff.The response time for new customers has also come down significantly with the introduction of this service.

All in all, companies in the banking and insurance segments have realised the advantages of having a robust and flexible IT and telecom infrastructure, and are deploying the best technologies to this end.

tele.net carried out a survey amongst leading banks and financial institutions to assess their telecom requirements, solutions and the key issues.

The following questions were asked in the survey:

  • What are the key technology requirements of the company?
  • What mix of service providers and vendors is used?
  • What are the biggest concerns with respect to telecom infrastructure?
  • What are some of the new software, enterprise and mobile applications that the organisation has implemented?
  • Which network security tools are used?
  • What are the redundancy tools used by the company?
  • Which are the new products or services that hold the most interest for the organisation?

  • Key technology requirements

    The survey shows that the top priority for most companies in this space is a flexible and cost-effective communications infrastructure that facilitates business continuity, improves customer interface and enhances operational efficiencies through multiple delivery channels.

    Most companies covered in the survey have opted for multiple WAN and last mile access technologies. For WAN connectivity, digital loop carrier (national long distance) and ISDN technologies are most widely used, followed by MPLS, digital loop carrier (local loop) and very small aperture terminals (VSATs).

    According to a survey respondent, while leased lines (dedicated links between two or more offices) are ideal for interbranch connectivity and have the bandwidth capability for frequent and fast data transfers in a secure manner, ISDN is primarily used as a back-up medium and for video conferencing.

    MPLS is also gaining traction. The increasing use of the technology indicates the need for a medium which offers a secured environment and a high data transfer rate. VSATs are ideal for connecting offices in remote locations as well as for back-up. The banks covered in the survey use VSATs for connecting ATMs in urban and rural areas.

    For last mile connectivity, optic fibre and digital subscriber line (DSL) are the preferred technologies. Wireless connectivity has also witnessed strong uptake and is used in conjunction with either DSL or optic fibre primarily for remote connectivity and back-up. The strong uptake of optic fibre for last mile connectivity is primarily due to its cost effectiveness, higher bandwidth, easy maintenance, low attenuation and ability to transmit signals over long distances.

    Service providers and vendors

    The survey indicates that while a mix of service providers is used for WAN infrastructure, Bharat Sanchar Nigam Limited (BSNL) is the preferred service provider for domestic leased lines and ISDN. The other key players in the leased line segment are Mahanagar Telephone Nigam Limited, Bharti Airtel, Reliance Communications (RCOM) and Tata Communications.Bharti Airtel is the leading service provider for MPLS and international private leased circuits (IPLCs). BSNL, Tata Communications, RCOM and Sify are the other key players in the MPLS space. A few survey respondents also use the services of global operators like Verizon and AT&T for MPLS connectivity.

    For internet protocol-virtual private networks (IP-VPNs), the services of BSNL and Bharti Airtel are used by most companies. Some of the survey respondents also use the IP-VPN service provided by international players like KDDI in partnership with Indian operators.

    List of respondents

  • ABN Amro, Sony George, Head, Network, Telecom and IT
  • Axis Bank, Sandeep Wagchaure, Vice-President, IT
  • Bajaj Allianz General Insurance, Manoj Bhutkar, Head, IT
  • Birla Sunlife Asset Management, Dilip Sharma, Head, IT
  • Cholamandalam MS General Insurance, S.N. Roy, Head, IT
  • Corporation Bank, A.P. Malhotra, Deputy General Manager, IT
  • HDFC Bank, Harish Shetty, Senior Vice-President, IT
  • HDFC Standard Life Insurance, Bhuvnesh Sharma, Senior Manager, IT
  • HSBC, Silajeet Samaddar, Head, IT
  • ICICI Bank, Sanjay Khanna, Deputy General Manager, Shared Services Technology Group
  • IDBI Capital, Shrikrishna Kadam, Head, IT
  • IFFCO Tokio General Insurance, U.C. Dubey, Executive Vice-President, IT
  • Saraswat Bank, Sagun Kulkarni, Head, IT
  • State Bank of India, H. Godbole, Head, IT
  • Syndicate Bank, Pradeep Saxena, Deputy General Manager, IT

    In the VSAT segment, Hughes and HCL Comnet are the leading companies, while the services of Tata Teleservices Limited and Tulip are also used by some of the survey respondents.

    The preferred service provider for DSL is BSNL, and RCOM is the first choice for metro Ethernet. Sify and Tulip are the leaders in wireless access technologies. For optic fibre, three operators are equally preferred: BSNL, RCOM and Bharti Airtel.

    Issues and concerns

    Respondents from 10 out of the 15 companies covered in the survey stated that their communications infrastructure required some improvement, while the remaining five said that they were completely satisfied with their current networks.

    Downtime was selected as the most important performance-related concern by the majority of the companies, followed by capacity constraint and security risks.Only one company had latency and interoperability issues.

    With respect to management-related concerns, increasing technology costs topped the list of issues for 11 out of the 15 companies, while the remaining respondents stated that both technology obsolescence and the lack of IT staff were key concerns.

    Software, enterprise and mobile applications

    Apart from email, which is used by all companies, the most widely used applications in the banking and insurance verticals are audio and video conferencing, toll-free services and instant messaging.Going forward, converged applications like audio and video conferencing and voice over internet protocol are expected to be used extensively.

    The applications that are yet to make a significant impact are telepresence, social networking and Web 2.0. While the survey respondents stated that cost is the key deterrent in adopting telepresence services, social networking is not encouraged at work at all.

    Enterprise applications such as CBS, CRM, business intelligence and inventory management are also widely used.Core banking applications are used by all the companies covered in the survey; nine companies use CRM and nine use business intelligence. ERP is used by only two companies.

    Fourteen of the 15 organisations use a number of mobile applications. Only one organisation uses the mobile device for just voice services. Mobile email, mobile data connectivity, corporate intranet and push alerts are among the most widely used applications. Eleven companies use mobile email, eight use mobile data connectivity, eight use push alerts and six use corporate intranet.

    Four respondents said that their companies use mobile conferencing, while three said that sales force automation is used. Six companies are looking to deploy both sales force automation and field force automation in the next year.

    Location-based services and vehicle tracking systems have not been deployed by any of the companies covered in the survey.

    Mobile application deployments in 2009-10 are expected to be slow. Eight out of the 15 respondents are not considering deploying new mobile applications Security is a key hurdle in this regard.

    Network security

    Most of the companies use access logs, security audits, user authentication, unified threat management, penetration testing, intrusion detection/prevention systems and proxy servers for network security. All the companies have network firewalls.Operating system security patches are used by seven companies. The adoption of virtualised unified threat management (UTM) is low, with only four of the companies using these solutions. All the companies feel that they have strong network security solutions in place and are not considering an upgrade in the next 12 months.

    Redundancy options

    Most of the companies have a robust redundancy infrastructure in place.Disaster recovery is the most popular redundancy option, with 10 out of the 15 companies using it, followed by mirror servers, which are used by six companies.Three companies use multiple redundancy options such as hybrid models, mirror servers and disaster recovery. Server provider diversity and log shipping each are used by only one company.

    The way forward

    In light of the current economic crisis, most companies have taken a conservative approach towards deploying new technologies and products.

    Silajeet Samaddar, head, IT at HSBC Bank, says, "In this current climate, we have become very cautious on network spending. I do not think that in this environment, we are looking at any growth.Cost optimisation is now a keyword and we are in talks with service providers to reduce costs wherever possible. We are currently not looking at adopting any new technologies or solutions."

    Similarly, S.N. Roy, head, IT at Cholamandalam MS General Insurance, explains, "The economic slowdown has impacted us drastically. We have cut down on a few things. For instance, while we were planning a more efficient disaster recovery centre and extra storage this year, we have now pushed out these plans for next year. Network spending this year will reduce as we have postponed our business expansion plans that included opening more branches."

    However, a different view is presented by Sandeep Wagchaure, vice-president, IT at Axis Bank. He says, "As of now, the economic downturn has not impacted our operations. In fact, we are considering an increase in network spending. This increase is being driven primarily by the growing number of branches as we are expanding our geographical reach to Class C cities. Going forward, we are considering deploying Wi-Max technology for some locations where wirelines are not feasible."

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