Stiffer Security Norms To Create $200 bil IT Solutions Market: PwC

Government regulations and statutory requirements, many initiated after the September 11, 2001 terrorist attacks in the US are increasingly driving information technology spending and could form a large part of the IT solution providers’ revenues.

Global consultant PriceWaterhouseCoopers (PwC) estimates that this segment could be worth $200 billion by 2005 and form 70 per cent of all new application development. “Conforming to legal requirements is going to involve huge IT spends,” says Terry Retter, director of strategy and technical programmes, PwC.

Across industries, from financial services to logistics, initiatives like the anti-money laundering Bill in the US, which seeks to unearth suspicious money flows to terrorist organisations and the container security initiative (CSI) that tracks container shipments are turning out to be multi-million dollar opportunities for offshore vendors.

Covansys, an offshore vendor is aggressively targeting the CSI space. The deadline for the initiative is January 1, 2005, which has been billed as ’The Sunrise Date’. From this day onwards, all bar codes will have to adhere to a uniform code standard, which will allow enforcement authorities to track containers with ease.

“The ongoing CSI efforts to establish standards for the security and integrity of containers and cargo throughout the transportation supply chain, will have far reaching effects on supply chain practices,” says a Covansys research paper.

The anti-money laundering Bill also spells big opportunity and a mid-sized software player like InfraSoft Technologies, has developed a solution for the segment. The market opportunity in the space is estimated to be about $65 million. “We hope to be the top player in this space,” says InfraSoft managing director Hanuman Tripathi.

In the healthcare and pharmaceuticals space, regulations such as HIPAA (Health Insurance Portability And Accountability Act), which enables ease of transaction among hospitals and insurance companies, the Health Level standard (HL7) and the 21 CFR Part 11 standard, a US Food and Drug Administration standard regarding use of electronic technology, are likely to result in large IT spends. Nasdaq-listed Cognizant with offshore development centres in India has formed teams to tap this opportunity.

Another area of interest is the banking and securities space. The Basle 2 norms, which come into effect by 2006, could see financial institutions loosening their purse strings. “We have had very good interest for the solutions in this area. In a recent customer meet for core banking solution there were a lot more queries for our Basle 2 solution,” says an i-flex solutions spokesperson.

The securities industry is also moving towards shorter settlement cycles and finally straight-through processing, where trades will be settled in real time. Currently, trades are settled every third day.

There is a strong regulatory push for this initiative and firms like Tata Consultancy Services, Infosys, Polaris and others are aggressively tapping this segment.

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