BFSI: The hottest space in IT

Banking, financial services and insurance segment have emerged as the "hottest" space in IT services industry with top companies acquiring smaller firms that have carved a niche in various segments of the BFSI space, according to industry officials.

The BFSI segment is also expected to see a consolidation over the next few months as industry leaders go for more acquisitions, they said.

Recently, BFSI-focused IT firm Kanbay acquired Accurum, another IT firm servicing the same segment, while Tata Consultancy Services acquired Phoenix Global Solutions to strengthen its offering for the insurance sector.

Another major player Cognizant, which had about 50 per cent of its revenues for 2004 coming from BFSI segment, acquired Infopulse, a Netherlands-based IT services firm specialising in banking and financial services industry.

According to IT research house Gartner, the IT spend in the financial services sector in 2003 alone stood at $124 billion and the spending was expected to grow $6 billion per year.

"We believe financial services is the hottest vertical and will continue to be a growth market in the next few years," Raymond Spencer, chairman and CEO, Kanbay International Inc., said.

R Chandrasekaran, managing director, Cognizant, said the market was seeing significant consolidation with large players acquiring several small and medium ones. "But, there is always a space for small and medium companies provided they are adequately differentiated in their value proposition," he said.

Cognizant, he said, would continue to aggressively look for acquisitions, but the focus would "clearly be on relatively small acquisitions".

The Nasdaq-listed Cognizant, which has its biggest presence in India, had also acquired Fathom, a Chicago-based consulting company focusing on high-end consulting for the telecommunications and financial services industries.

Kanbay's Spencer said his company, as a tier-1 player, was focused on the financial services industry and looking out for any options that would add to its domain expertise.

"Acquisition is one of the multiple growth strategies that Kanbay has adopted to further enhance this business domain expertise".

An official of industry body Nasscom said the growth in the India's IT industry would come from companies that offer specialisation and "offer a certain domain expertise, such as financial services, healthcare or retail."