Given the current economic climate, financial institutions in Asia are expected to embark on spending to drive innovation, instead of going into "hibernate" mode, say industry observers.
David Furlonger, industry service director for banking and investments at Gartner, pointed out that a lot of innovation usually occurs during periods when organizations are in "significant distress".
"[Those companies] do things that they would not otherwise do because they're put in positions that force them to think outside of the box," Furlonger, who is also Gartner's distinguished analyst and vice president for industry research, noted in a phone interview with ZDNet Asia.
He cautioned that when the economy is highly volatile, as it is now, there are many opportunities, but there are a lot more risks as well. "So for those firms that are more conservative, it might be too great for them to experiment, and it would be more advisable for them to better use their money on driving existing businesses," he said.
To survive the economic downturn, financial institutions must undertake one of two extremes now: focus on IT innovation for radical change, or hibernate to minimize cost and prepare for later action, Gartner said in its Web site last month.
Gartner defines companies that innovate as those at the leading edge of technology, which develop accurate cost-benefit models that link IT changes to business metrics so that they can quantify benefits and justify the radical transformations they encourage.
Organizations that hibernate, Gartner said, are making a conscious decision to prepare for survival by avoiding IT change until absolutely necessary. They take a short- to medium-term approach to keep their systems running at minimum cost, and build up savings for use when market conditions improve.
Those taking the middle road by doing incremental modernization, risk wasting their IT budget for little gain, according to the statement.
In Asia, Furlonger expects more innovation than hibernation to occur. This is because most Asian economies are still growing, and the causes of the problems affecting financial institutions elsewhere, do not--for most part--affect the Asian institutions since they are focused on their local markets.
"So there is more opportunity for them to drive innovative strategies and delivery around channels, service and support, and around how they access markets within their regions," he explained.
Most of the innovation by Asian financial firms is likely to be done by those looking to expand within the region, said Furlonger. "Also, the Chinese market is still growing and there is still opportunity for some Chinese banks not only to innovate, but also to grow beyond China. You [will] see investments by some of the Chinese banks in other markets," he added.
According to K. Ananth Krishnan, chief technology officer of global IT services and outsourcing company Tata Consultancy Services (TCS), there is both innovation and hibernation among the company's financial institution clients.
One group is focusing on customer experience and making investments in next-generation technologies at the backend to increase efficiency, Krishnan said during an interview. "They see this as an opportunity to win new customers, especially if their competitors are in trouble or likely to be in trouble.
Such companies, he pointed out, are not only traditionally innovative, but they also view the downturn as an opportunity.
According to Krishnan, financial services companies that are in hibernate mode and putting off discretionary spending, may still invest in necessary initiatives. "Even those companies are not averse to any initiative that can allow them to become more efficient," he said, adding, any initiative that is related to efficiency will "still find an audience" among these organizations.