Mumbai: Indian banking and securities companies are expected to spend about 41,700 crore on IT products and services in 2013, an increase of more than 13 percent over 2012, research firm Gartner said.

The spending by financial institutions, which includes expenses on internal IT services (including personnel), IT services, software, data centre technologies, devices and telecom services, is estimated to be about Rs 36,900 crore in 2012, Gartner said in a statement.

IT services is expected to be the largest segment in overall spending category at Rs 13,100 crore in 2013, due to a strong focus on the financial services sector by IT services providers.

The segment is also growing stronger than other segments at nearly 18 per cent compared to 2012, Gartner said.

Software is the second fastest growing segment with spending on pace to increase 17.1 per cent, followed by internal services (that includes IT personnel) at 15.7 per cent.

In the software segment, desktop software and enterprise resource planning (ERP)/supply chain management (SCM)/customer relationship management (CRM) are expected to grow 22.1 per cent and 21.7 per cent, respectively, it said.

"Focus on expansion and increasing market share remains a top priority for banks in India. As in other emerging markets, the front office gets preference over the back office in major investments," Gartner Research Director Vittorio D'Orazio said.

Although there are a number of requests from Indian banks regarding the modernization and legacy replacement of core banking systems, there is still a gap between front-office and back-office services.

"This explains the growth rate for 2013 in the vertical specific software segment at 17.3 percent. We also see increasing adoption of packages, especially for 'lite' core banking systems to address modernization and replacement," D'Orazio said.

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