Banks to spend $12bn outsourcing by 2005

European banks will spend over $12bn on IT outsourcing services by 2005 on the back of fast growth in business process outsourcing (BPO), according to analyst Datamonitor.

The report, Vendor strategies in European Financial Services Outsourcing, predicts new vendors to the BPO market but says the "extremely competitive" outsourcing landscape in general will continue to be dominated by the big established players.

While 34 vendors generate in excess of $10m in revenue from the European outsourcing market, only 16 make more than $100m and just two generate over $1bn. EDS currently leads the booming financial services BPO area but the top six control only a fifth of the market, which was valued at $3.3bn last year, the report said.

Anders Maehre, managing analyst for Datamonitor's financial services technology practice, said in a statement that hardware vendors such as Fujitsu, Hewlett Packard and IBM will form a third niche hotspot alongside software firms Misys and Unisys and services vendors EDS and Accenture.

"The financial services BPO market is likely to remain a highly fragmented one over the short and medium term future with several niche markets emerging as hotspots," he said.

A recent flurry of BPO deals has seen the likes of Thames Water outsource its billing and customer correspondence processes to Xansa in India in a groundbreaking move for the utility sector.

But analyst Forrester has also warned that vendors are exaggerating their BPO abilities and that users should not believe all the hype.