How banks can gain value from outsourcing IT selectively and effectively

February 21st, 2013 by Rahul Jain Leave a reply »

While banks and financial institutions have had a tendency to outsource business processes such as customer services, they usually retain control and ownership over the IT infrastructure that supports these elements. This is reflective of a general mind-set that financial institutions must retain total ownership on all IT assets. However, this means that many are missing out on the business benefits that can result from outsourcing the IT that supports some of the more flexible business processes. If financial institutions are selective and intelligent about which processes they outsource, they can certainly maintain control, whilst achieving significant reductions in the running cost of their IT.Outsourcing3

There are many IT processes which, quite rightly, financial institutions are reluctant to outsource. Banks understandably don’t want to be perceived as losing control of their mission-critical and sensitive processes. In addition, some essential banking systems such as BACS and Swift payments are often based on legacy networks and therefore by nature are fairly inflexible and difficult to outsource. Many banks are also concerned about the potential security implications of public cloud models and, because the data can sit anywhere, this often doesn’t sit well with financial regulators.

However, there is certainly value to be obtained by outsourcing the IT for many non-core processes. Indeed, any efforts spent developing, running and maintaining the IT supporting non-core processes would often be better spent by the financial institutions focusing on revenue-generating activities. Email management, for example, is probably best done by a specialist third party. While for banks in particular, the process for identifying phishing e-mails is certainly another that should be outsourced – no bank needs to be scouring the entire internet for fraudulent websites, nor does the infrastructure required to support such a system need to be hosted internally. For processes such as these, banks don’t need to develop and host their own systems as there’s no element of competition in this space.

Banks can not only strengthen security by removing such processes from core, sensitive and performance-reliant processes, but banks will also gain compelling business benefits. By working with third-party suppliers to ensure the development of sophisticated SLAs, banks and financial institutions can maintain the required control, while benefitting from the scalability and cost-efficiencies associated with utilising outsourced infrastructure. Benefits can be gained by choosing to use a carrier-neutral data centre, as they can offer an uncontended service (including guaranteed levels of infrastructure performance). This form of outsourcing can guarantee the resource availability required by banks and financial institutions, while enabling them to keep essential banking systems such as BACS in-house.



1 comment

  1. Rahul Sharma says:

    Nice Insight. It is informative. Outsourcing requires prior research before getting into it.

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