An interesting trend has emerged in the 14 years that IDC Financial Insights has been tracking the performance of the top technology organizations that support the financial services industry worldwide. The Goliaths of the technology industry, those firms whose total revenues represent their breadth of solutions and services across many vertical industries, are losing ground to those relatively smaller IT firms that focus on financial services as their main markets. The shift has been dramatic, especially over the last 5 years, and it portends a future where industry focus may be they key to financial success.
2017 marks the 14th year that IDC Financial Insights has conducted its FinTech Rankings research, a quantitative "state of the industry" measurement for financial services-based revenues earned by the top 125 technology firms globally. The financial services industry is comprised of banking, insurance, and capital markets firms that buy hardware, software, and services from 3rd party IT providers. The ranked list of vendors can be found here: 2017 IDC FinTech Rankings
Two categories of IT companies are ranked:
- FinTech Rankings: Top 100 – These are IT vendors that derive more than one-third of their revenue from financial institutions. This category is comprised of firms that primarily supply software and services to the industry.
- FinTech Rankings: Enterprise 25 – These are technology companies serving multiple industries, and whose financial services revenues are substantial but less than one-third of their revenues from financial institutions. In addition to software and services, many of these organizations also supply hardware to the industry.
On average, firms in the Top 100 group earned 52% of their total revenues from the financial services industry. (Half of those vendors earned 90% or more of their revenues from financial services) The organizations in the Enterprise 25, on the other hand, earned only 12% of their revenues, on average, from financial services.
In 2012, revenues from financial services institutions earned by the Enterprise 25 group was $117B, almost twice as large as those earned by the IT companies on the Top 100 list, $63B. The 2017 IDC FinTech Rankings research shows that the gap between revenues for the two tracked groups of companies has narrowed significantly. The combined financial services revenues for the Enterprise 25 firms dropped to $93B, while the same revenues for the Top 100 rose to $84B. It is easy to argue that 2017 revenues will demonstrate that the gap will have been reduced to zero, if not that the Top 100 revenues will slightly exceed those of the Enterprise 25.
Revenue growth for the Enterprise 25 group, as a whole, has been negative (-6%) over the last 5 years. During that same time, revenue growth for the Top 100 companies has grown 7%. Digging deeper, we find that it's only 9 companies in the Enterprise 25 group that have had flat to negative growth in financial services revenues. But those 9 firms represent 60% of the total financial services revenues for that group. These Goliaths of the industry are weighing down the Enterprise 25.
If the Enterprise 25 firms are the Goliaths, then the Top 100 firms are clearly the Davids. Their revenue growth represents not only an increased share of spend by financial services firms, but arguably also represents a shift of market share away from the larger IT vendors. One significant difference between the 2 groups, besides the focus on financial services, is the dependence on hardware sales by many of the Enterprise 25 firms, and the focus on software and services from the Top 100. But this difference is not enough to explain the rapid decline in revenues for the Enterprise 25 group. Another factor could be the stronger software focus from the Top 100 organizations compared to those on the Enterprise 25 list.
The annual IDC FinTech Rankings program serves the needs of financial institutions worldwide by supplying current and historical trends in performance by the partner companies that support technology transformation. The rankings data indicates longevity, strength, and commitment to the industry, as well as tracking newcomers and consolidations in the top IT firms globally. More analysis is being done to uncover the factors leading to the shift in revenues we've been tracking over the last 5 years and longer, but the reality is that there seems to be a correlation between a focus on financial services by the Top 100 vendors, and their associated revenue growth rates that currently outpace spending by financial institutions globally.