By AMIT ROY CHOUDHURY

SINGAPORE-BASED banks have started to re-adjust their technology investment plans, reflecting a more positive outlook for the country's financial sector, according to the latest study by IDC Financial Insights.

The banks' plans for 2010 signal a return to long-term transformative projects that require significant dollar investments in IT, as well as in time, personnel and IT management resources, IDC's Michael Araneta told BizIT.

The report is based on inputs from senior IT and line-of-business executives from 15 Singapore-based banks who attended the recent IDC Financial Insights Banking Roundtable, as well as follow-up research on IT spending by IDC Financial Insights analysts in the region.

'Projects concerning risk management, operational efficiency (IT optimisation, virtualisation and application standardisation) and data centre consolidation represent some of the highest planned IT spend areas moving forward,' Mr Araneta, IDC Financial Insights Asia Pacific senior consulting and research manager, said.

He noted that moves by domestic banks to go regional and the hubbing initiatives prevalent in the market point to how Singapore banking will become yet more 'international'.

'Singapore is increasingly becoming a unique marketplace for financial technology,' he noted.

To adjust, banks will have to quickly adapt to international best practices in IT strategy and IT management, especially in ensuring proper due diligence of technology partners.

'Best practices also continue to be discovered, especially in alternative IT delivery models (multi-sourcing, software-as-a-service, cloud computing and virtualisation),' he added.

Mr Araneta observed that what marks a shift of IT priorities from the past two years is the return of projects that cover core banking, multi-channels and customer experience.

IDC Financial Insights noted that these re-emerging projects will allow banks to revisit the use of customer experience in building the banking business.

'Along with drastic economic conditions in 2008 and 2009, banks focused on protecting existing customer bases. Amid the crisis, it was imperative for banks to more effectively understand customers within the current base, to have a comprehensive view of the customers' existing product holdings and interactions, and to see the drivers of cost and revenues within these relationships,' Mr Araneta said.

He added that as recovery takes shape, banks are reverting to initiatives that focus on achieving a single customer view to expand their customer bases and increase share of wallet.

'They are thinking about other addressable markets. In addition, in the year ahead, banks will focus on customer accessibility and instant fulfilment at the customer touch points.'

For banks overall, the crisis has entrenched risk management as a top priority, and the early signs of recovery have not led to complacency.

'Risk management is expected to become yet more important - and there should be continued investments in technologies that help banks identify, manage, and mitigate various forms of risk,' Mr Araneta added.

The report also points out that small, representative banking units in Singapore will invest in discrete solution areas ranging from connectivity to their home core banking systems, remittance, anti-money laundering (AML) to compliance.

'By virtue of low investment bases, these smaller outfits will show highest IT investment jumps in the market,' the analyst noted.

Meanwhile, the share of total IT spending undertaken by large international players is expected to further increase. In 2010, IT spending by large global players will comprise about 65 per cent of total spending in the market.

This is due to huge investments in infrastructure that will enable them to use Singapore as a hub to serve Asia-wide and even worldwide operations.

Meanwhile, domestic banks will begin to revisit large-scale and transformative projects related to channels, CRM (customer relationship management), enterprise data consolidation, and core banking upgrades.

'Amid the crisis, most of these projects have either been postponed or cut down into more digestible pieces. Recovery would mean that local banks can afford to be more aggressive in these solution areas.'

Mr Araneta added that all these initiatives point to how Singapore banking will become yet more 'international' after the crisis.

'Consequently, banks have to quickly adapt to international best practices in IT strategy and IT management.'

He added that banks need to adopt changes in their IT vendor strategies.

'Vendor incumbents in other markets will have to build their presence and domain expertise in Singapore, which foreshadows an expansion of IT vendor teams and greater push towards effective vendor ecosystems in the island.

'Furthermore, the Singapore-based IT executive will become more influential, not only in regional architecture issues, but also in keeping significant hold of investment dollars,' Mr Araneta added.

This article was first published in The Business Times.