Posts Tagged ‘IT’

In-sourcing of IT operations gains traction

October 24th, 2014

“There has been shift towards in-sourcing by U.S. firms over the past three years in the manufacturing sector and also in specific areas of high intellectual property value in companies.”Outsourcing40

In a reversal of trend, major firms are now looking to move back their information technology functions in-house or what is termed as in-sourcing, from their earlier stance of outsourcing to low-cost providers in India.

Firms such as auto major General Motors, Target, Zynga, Nordea and AstraZeneca have looked to build their own information technology team.

“There has been shift towards in-sourcing by U.S. firms over the past three years in the manufacturing sector and also in specific areas of high intellectual property value in companies. The desire has been to keep vital IP and know-how within the company,” said Mary E. Shacklett, President, Transworld Data, a technology analytics, market research and consulting firm.

British-Swedish pharma major AstraZeneca is looking to bring down its IT outsourcing to 30 per cent in the next three years from 70 per cent now. It works with eight vendors, out of those HCL Technologies mainly handles infrastructure, while Cognizant, Infosys and Accenture do application development and maintenance.

The company’s global IT budget is roughly $1.3 billion, which it aims to halve in the coming years. “In-sourcing is a silent trend. Companies like General Motors are on it for the last three years. This is unlike the earlier outsourcing trend, which had people shouting from rooftops. So, nobody is talking about ‘in-sourcing,’ at least not yet,” David Smoley, Chief Information Officer, AstraZeneca, said. The firm has launched is own captive arm in Chennai which will handle in-house IT work and support its 51,500 employees worldwide.

In 2012, General Motors Chief Information Officer Rondy Mott embarked on a plan to bring back its IT work inwards. At that time, 90 per cent of General Motor’s IT services where provided by Helwett-Packard/EDS, IBM, Capgemini and Wipro and only 10 per cent was in- house. The plan is to reverse this ratio in three years. Mr. Mott is of the view that GM cannot be creative or fast enough with outsourced IT.

When contacted, a GM spokesperson said, “All we can confirm at this point is that GM IT’s in-sourcing strategy is on track”.

AstraZeneca’s Mr. Smoley said that one of the reasons why his firm looked at in-sourcing was to take control from an IT prospective and to improve efficiency in terms of faster delivery of drugs.

Research firm Gartner said it was seeing a fundamental shift in the approach to digital business causing organizations to rethink their approaches to sourcing. “The threat many Indian providers will face is from the shift happening from labour to technology arbitrage. How quickly Indian providers can change gears to grab the opportunity and move forward even if that means constructive destruction of some of the existing business models could define future success,” D.D. Mishra, research director at Gartner, said.

“The shift to captives represents a long-term commitment to offshore-based services. Overall, companies in Europe and the U.S. are looking to perform more work offshore in India, not less. Captives are not a threat for vendors, but, in the short-term, can cannibalize a vendor’s business,” said Peter Schumacher, President and Chief Executive of Germany-based consulting firm Value Leadership Group Inc. “Offshore services firms with strategic vendor status, and those that are organizationally agile and collaborative, are likely to be least impacted – some may even benefit.”

Source:http://www.thehindu.com/business/Industry/insourcing-of-it-operations-gains-traction/article6528310.ece

Shell Seizes The Moment And Moves 75% of IT Infrastructure To The Cloud

October 24th, 2014

Oil giant Shell has decided to embrace cloud computing. The firm has revealed a major overhaul of its IT infrastructure, with 75% being migrated to the cloud, tech news site V3 reports.Outsourcing39

Shell’s enterprise product manager Oskar Brink made the revelation on Tuesday at the AWS Enterprise Summit in London, where he admitted that the decision to shift to the cloud had taken a lot of persuasion of the firm’s corporate stakeholders.

He spoke of the advantages of the cloud in helping control the cost, risk and agility of Shell’s IT environment, which consists of up to 10,000 applications.

He also talked of how expensive the portfolio is to manage and went on to explain: “Moving the infrastructure pieces into the cloud helps us to get [costs] more under control. We’re moving into the cloud as much as we can.”

One of the advantages is the flexibility cloud services offer. This has helped Shell reduce costs by allowing it to use on-demand services whenever they’re required, rather than being a continuous part of its internal infrastructure.

Brink added: “We look at the cloud as an off/on capability – actually we say off rather than on. What we don’t use we turn off, we don’t pay for it. That’s what we’re trying to achieve in [our] portfolio.”

Shell began outsourcing to virtualised services back in 2008, when 25% was migrated to the cloud. To reach the point where three-quarters of its infrastructure is located there, it took a lot of effort to overcome scepticism from the company’s IT chiefs and stakeholders – Brink likened it to “turning a tanker ship”

Still, it’s not the first time the company has shown that it is willing to move with the times – last year, it revealed plans to support 135,000 mobile devices in a BYOD strategy.

Source:http://www.misco.co.uk/blog/news/02395/shell-seizes-the-moment-and-moves-75-percent-of-IT-infrastructure-to-the-cloud

Lufthansa close to deal with IBM for IT infrastructure unit

October 24th, 2014

German airline Lufthansa is close to a deal to sell its IT infrastructure unit to IBM (IBM.N), including an outsourcing agreement for the services, as part of a shake-up of its technology activities, it said on Wednesday.Outsourcing38

Europe’s largest airline by revenue is undergoing restructuring and cost-cutting efforts to better position itself to compete with low-cost carriers and Gulf rivals.

It earlier this year said it was seeking a buyer for the unit, which provides data centers, networks and telephony, because it requires a high level of investment and economies of scale, which the airline could not provide.

Under the planned deal, Lufthansa will outsource all of its IT infrastructure services to IBM under a seven-year deal and the U.S. firm will take over the airline’s IT infrastructure division, currently part of Lufthansa Systems.

The partnership announcement comes two days after IBM, a company undergoing a stark transition of its own, shocked the markets with lower quarterly results and by suspending its full-year forecasts.

IBM, now largely a computer services supplier, said it suffered a marked slowdown in September as many customers stopped buying new services due in part to macroeconomic concerns but also the rapid pace of changing client demand for the latest technologies delivered as Internet-based services.

Lufthansa shares rose 2.6 percent in early trading, the top gainer among German blue-chips .GDAXI, as analysts welcomed the progress in the restructuring of the division,

The deal will result in a one-off pre-tax charge of 240 million euros for Lufthansa, which will not impact its operating result for 2014. It will allow Lufthansa to reduce its annual IT costs by around 70 million euros a year.

A final price for the sale is still being negotiated, a spokeswoman told Reuters.

The sale is part of plans to reorganize the Lufthansa Systems business into three parts – Infrastructure, Airline Solutions and Industry Solutions, with the latter two to be kept within the Lufthansa group as independent companies.

The infrastructure business, which employs 1,400 people, accounted for 40 percent of Systems’ total turnover of 640 million euros ($883.45 million) in 2013 but it made up only 25 percent of the unit’s profit.

The Lufthansa Systems restructuring is expected to be complete in the first quarter of 2015, with the deal to sell the IT infrastructure unit due to complete by March 31, 2015.

Source:http://www.newvision.co.ug/news/661015-lufthansa-close-to-deal-with-ibm-for-it-infrastructure-unit.html

Indian IT firms expected to be more acquisitive going forward: Peter Bendor-Samuel

October 24th, 2014

Peter Bendor-Samuel,  founder & CEO of management consulting and advisory firm Everest Group is one of the few global consultants who have been watching the Indian IT outsourcing landscape quite closely. In an interview with Bibhu Ranjan Mishra , he talks about how the Indian IT services firms have now reached a level of maturity when they are expected to be more acquisitive. He also talks about how Tata Consultancy Services (TCS) has been able to differentiate itself from rest of the pack backed by consistency in strategy and execution. Edited excerpts:Outsourcing37

Recently we saw Cognizant, an offshore-centric IT services company showing rare aggression BY acquiring US-based healthcare solutions provider TriZetto for a whopping $2.7 billion. What does it mean for Indian IT services companies?

It (Cognizant’s acquisition of TriZetto) is really going to change the competitive dynamics. But there is no doubt that companies like Infosys and TCS can do it because they have got great balancesheets to do these kinds of things. My guess is they will (do it). This is time for the industry to consolidate and this is an appropriate time for Indian heritage firms to step up their inorganic growth pursuits.

You have been tracking the Indian IT services companies quite closely for long. Are you seeing any change in the way these companies operate now as compared to few years ago?

Clearly, the Indian IT services majors are a matured lot now. They have got much more seasoned leadership. Look at TCS; it has a very seasoned and matured leadership team, very strategic in operation. They are riding a huge wave. They are running down the hill. I can say that no one else at the moment has that kind of capability. The next step for them is to be acquisitive.

How has TCS managed to leapfrog the rest of the peers?

For TCS, much has to do with their leadership team. From the early days when they were about an in-ward focused company, TCS was among the earliest ones to take a customer-centric view. TCS thought about value to clients whereas Infosys continued to focus on maintaining high margin. So, TCS was more forward looking and more consistent in their approach. I think Infosys struggled with that. They (Infosys) were too much focused on growth and profits, and customers did not agree.

But TCS has now improved its profit margins to one of the industry leading?

That’s true. But just think how they are doing it? From the very beginning, Infosys was focused on making a margin play whereas TCS became a low cost producer. They (TCS) drove huge investments in labour pyramid to make it flatter and more efficient. They invested more in automation and productivity tools. I think the other aspect is, in this business scale helps. So TCS was able to benefit from the scale advantage. It is particularly important in two aspects. They were able to get large wallet share in big clients while they were able to price lower than Infosys.

With Vishal Sikka at the helm, people say perhaps Infosys is going to make a much larger product play now that before. What is your view?

I think they will unlikely do so at this stage of their services business. They have to do significant intellectual property (IP) acquisition. Infosys has a huge capacity to do that. They have got a great balance sheet and the right structure. They have got a separate organisation which they can run differently for products. I like that structure. Putting the investment to the product side makes a lot of sense. I think that will be a very attractive strategy to look for.

What are the key changes that you are seeing at Infosys after the joining of Vishal Sikka?

I think he is still trying to have the feet on the ground. He has met many clients. But these are still early days. I think his next step will be get talents. I won’t be surprised if he does not get talents from outside. It is not that Infosys does not have enough of them inside, but more so to drive the kind of changes he wants to. I would encourage him to bring in non-Indian talents. Infosys needs to do with multi-cultural aspects as it is very Indian-centric now.

What are your view about Wipro and HCL Technologies?

There is no doubt that Wipro has become a much aggressive company, led by T K Kurien. Wipro is competing in the multi-tower transactions in domains which used to be the focus of companies like IBM and Accenture earlier. So, they are certainly seeing a lot of momentum right now. As far as HCL is concerned, while they are very much focused on infrastructure services, they need to strengthen their applications and BPO offerings.

Beyond these four companies, any other companies that come to your mind who can be the challenger in the IT services space?

The guy you should keep an eye on is Virtusa – they are very aggressive, very strong in digital; they are quite well-positioned to take advantage of the new technologies. They are growing very fast. So also is Syntel; they are growing very fast backed by a very aggressive management team. Syntel’s success lies in their ability in turning some key accounts to very large accounts. Then there are companies like Mindtree, but I think they have really to figure out how to differentiate in a market where scale really matters.

Source:http://www.business-standard.com/article/companies/indian-it-firms-expected-to-be-more-acquisitive-going-forward-peter-bendor-samuel-114102300505_1.html

Wipro plunges over 4% as Q2 results disappoints Street

October 24th, 2014

Shares of WiproBSE -3.60 % plunged over 4 per cent as the market opened for Samvat 2071 muhurat trading as the Street was disappointed with its second quarter results.Outsourcing36
The company reported a consolidated net profit of Rs 2,085 crore during July-September quarter, down 0.9 per cent, against Rs 2,103.2 crore in previous quarter.

Sales in during the quarter increased to Rs 11,816 crore, up 12.4 per cent, from Rs 10,508.3 crore, QoQ.

The company sees Q3 IT services revenues at $1,808-1,842 million. Q2 EBIT margins stood at 22 per cent vs 22.8 per cent, QoQ.

“Wipro reported weaker than expected performance for Q2FY15, with revenue and margin missing the expectation. Moreover, the guidance was softer than PLe/Consensus expectation. Management is still confident of improving growth momentum in H2FY15 on the back of large deal wins. Moreover, return of discretionary spend in the US and Outsourcing penetration in Continental Europe makes demand outlook healthier,” said Prabhudas Lilladher report.

The brokerage has revised its target price to Rs 650.

“We see improvement in the win rate to drive revenue momentum in CY15, along with available margin levers that would accelerate earnings momentum. However, we see near term weakness in stock due to weaker than expected guidance,” the report added.

At 06:30 p.m.; the stock was at Rs 557.60, down 4.14 per cent, on the BSE. It fell 4.7 per cent intraday to touch a low of Rs 554.30.

Source:http://economictimes.indiatimes.com/markets/stocks/news/wipro-plunges-over-4-as-q2-results-disappoints-street/articleshow/44918083.cms

Wincor nixdorf portavis’s IT outsourcing contract to be renewed by sparkasse bremen

October 24th, 2014

Wincor Nixdorf Portavis’s contract as IT outsourcing partner of Sparkasse Bremen is to be renewed for a further five years starting October 1, 2015. The contract has been in place since 2005 and was already renewed in 2011 for a minimum period of four years. Under the contract, Portavis is tasked with the operation and management of the savings bank’s IT infrastructure as well as its customized banking applications and self-service systems. That enables Sparkasse Bremen to optimize its IT processes and substantially lower its operating costs.Outsourcing36

The scope of services covers operation of the bank’s computer center, which consists of almost 300 servers with over 40 applications, operation of 430 Wincor Nixdorf self-service devices, 62 Wincor Nixdorf automated teller safes, around 1,850 thin clients and PCs, more than 2,100 telecommunication systems, 730 printers and around 3,400 network ports as well as standard applications. Portavis monitors and manages the entire IT infrastructure, including the self-service systems, coordinates service call-outs and ensures proactive upkeep and maintenance of the associated hardware. In addition, Portavis provides Sparkasse Bremen with an end user help desk that helps users rectify errors independently, and delivers monthly quality reports on the agreed service levels.

Wincor Nixdorf Portavis is a joint venture of Wincor Nixdorf, Hamburg Sparkasse and Sparkasse Bremen.

Source:http://eprretailnews.com/2014/10/23/wincor-nixdorf-portaviss-it-outsourcing-contract-to-be-renewed-by-sparkasse-bremen-7654321234567890/

The retail banking sector’s IT systems need an overhaul to become more customer-centric

October 22nd, 2014

This article discusses some of the risks and opportunities facing the retail banking sector looking to transform their legacy technology platforms, based on Bird & Bird’s in-depth experience advising banks on transformational projects. It also sets out a recommended approach to help to overcome some of the legal and operational bottlenecks banks may encounter when undertaking such projects.Outsourcing35

In recent months problems with banks’ IT systems have been exposed as Lloyds and RBS customers have experienced difficulties ranging from being unable to withdraw cash from ATMs to the failure of their debit cards. Part of the problem originates from a chronic under investment in IT that has left banks with legacy systems that cannot cope with new demands.

There is a growing acceptance that there is a technological revolution coming in the financial services sector and unless banks adapt their legacy IT infrastructure to meet this change they risk becoming obsolete.

Many banks have IT systems predicated on an out of date branch-based and batch-orientated business model. The assumption (perfectly legitimate in the 1960s or early 1970s when the systems were developed) was that customers accessed their account via a branch and banks closed in the afternoon and had until the next day to update systems and so data was processed overnight in batches. How things have changed!

New digital entrants are emerging

Against this backdrop, the spread of digital technologies is changing the way customers interact with their banks. They are used to the customer-focused platforms of online retailers such as Amazon and Apple and expect a similar service in the banking space. Following the banking crisis and the wave of disaffection with the incumbents, new digital entrants have emerged looking to disrupt the status quo through leveraging new technologies to provide a service that is more aligned with this mind-set; offering online, customer-focused, 24 hour systems. For example, Atom Bank, the UK’s first “digital bank” is expected to launch in mid-2015 and Wells Fargo plans to pilot a new system that enables its customers to sign into their banking application by using voice and facial recognition systems on their mobiles. There is a growing acceptance that there is a technological revolution coming in the financial services sector (in the same way that it has already occurred in the music, insurance and publishing industries) and unless banks adapt their legacy IT infrastructure to meet this change they risk becoming obsolete.

Transformation projects

IT transformation projects come in a variety of shapes and sizes as each bank’s issues will be different.  For example:

big bang approach: the aim is to replace the relevant legacy technology with a new system. This is expensive and risky given the scope of such projects and in our experience can take a minimum of 5-6 years to complete. But, the results can be far-reaching. Nationwide, following the implementation of their real-time SAP banking platform, stated that they believed the platform had equipped them to become the number one financial services provider for customer service;
build and migrate: the bank will set upa new branded line of business using the latest technologies.  Once the line of business is up and running and profitable it acquires the books of business (e.g. mortgages, current accounts) from the host bank and the old banking system underpinning the host bank is wound down by natural attrition as accounts expire and customers are encouraged to move to the new brand; and
hybrid: another option is to retain the legacy back end and build new front end channels that leverage new technologies (e.g. Barclay’s PingIt mobile payment service) to meet customer demand and communicate with the legacy core banking systems via interfaces. This will provide the benefits of new technologies whilst saving costs and complexity as the core banking backbone remains. Over time, as business processes are streamlined and new technology developed to augment the front end customer-facing systems, the bank will look to transform its core banking system.
Whatever the option, there will be risks and our recommended approach section below can help reduce them.

The core drivers for IT transformation projects

Many banks appear to be complacent as to the threat of new digital entrants. They have seen this all before and survived; whether it was the threat of the internet banks such as Egg or the emergence of the building societies. So what has changed?

Dramatic changes are happening in the financial services sector driven by new technologies, regulation and consumer behaviour and this is highlighting the unsuitability of banks’ legacy IT systems. This has been exacerbated by the loss of the ownership of the customer as new regulations in the UK have made it easier for customers to switch current accounts. Banks will need to refresh their systems to adapt to an increasing customer—focused industry or risk losing business and becoming redundant.

A bit more detail on the key reasons driving IT transformation projects:

new technologies: as much as 10% of a bank’s revenue can be spent on maintaining a bank’s IT systems and that is driven largely by the complexity of the legacy infrastructure.  Banks can save money by replacing the multiple technologies and interfaces they have built up over the years with a coherent, singular banking framework for technology. Technological investment can also increase profitability for affected banks through capital investments in cheaper software that automates business processes to replace more expensive labour;
regulation: increased regulation and political and economic uncertainty have led to lower returns and an increase in overall costs as legacy technology struggled to cope with new regulatory requirements;
consumer behaviour: banks’ customers are evolving with the technological landscape and are demanding mobility, transparency and greater access through a variety of alternative distribution channels (e.g. mobiles and tablets). Banks are having to respond with a shift towards customer-centric IT architecture to meet these demands; and
competition: technology start-ups, retail companies and telecommunications providers have all entered the financial services sector and are challenging the traditional players. Banks are investing in technology to offer products and services that seek to differentiate themselves from these new entrants, or at least keep pace with them.
Contracting options

There are two main contract structures that can be adopted for an IT transformation project:

single services agreement: one supplier contracts with the bank and takes responsibility for the end to end delivery of the project; or
multi-vendor framework: multiple suppliers working together under separate contracts to deliver the project.
Single services agreement

This structure reduces operational and legal risk for the bank as it employs a “one throat to choke” model. The contracting supplier will provide some of the services directly to the bank via the prime contract and then subcontract other elements to specialist third party service providers, but will remain liable for the end to end delivery (including the performance of its subcontractors). In the event of a default, the bank has the benefit of only having to seek redress from the contracting supplier.

The risk for the supplier is that it is liable for the successful delivery of the entire project. This enhanced risk may translate into higher costs which may deter some banks. However, the size of the liability exposure for the supplier may mean it is still reluctant to take on responsibility notwithstanding the financial upside.

A practical example: the supplier’s liability under the prime contract with the bank may be significant (e.g. a percentage of the fees paid or payable for the entire project, such as £100m), but it is rare for it to be able to replicate the liability structure agreed in the prime contract in its subcontracts (in particular the level of the liability cap which may be a smaller figure, such as £1m). The risk to the supplier is that the subcontractor defaults on its obligations under the subcontract causing a breach of the prime contract by the supplier. The bank would recover its losses from the supplier under the prime contract up to the £100m cap, but the supplier would only be able to recover up to £1m of the damages paid to the bank from the subcontractor under the subcontract.

Multi-vendor framework

This may be deployed where the bank has been recommended a number of IT solutions from various suppliers who will then, for example, implement each IT application and then the bank may use a system integrator to ensure all the different applications can communicate with each other.

The risk to the bank in a multi-vendor framework derives from there being multiple suppliers implementing each IT application together with a systems integrator trying to integrate these applications. Each supplier will have a separate contract with the bank.

In such a multi-vendor environment, a default may occur but it may not be solely caused by one supplier: it may be a breach that is caused by a number of suppliers (e.g. supplier X failed to provide a deliverable to supplier Y who then defaulted in its contract with the customer). This can lead to unhelpful finger pointing between suppliers as neither party wants to admit responsibility. This can lead to delays and an inability of the bank to easily identify responsibility for defaults and seek redress (when compared to the single services agreement model).

A way forward

Set out below are a few of the legal and operational bottlenecks that can be encountered and some of the solutions available to overcome them.

Ensure there is business buy-in

Projects often fail when there are uncoordinated IT decisions being made by individual business units which contribute to a fragmented implementation. Time spent planning is never wasted!  The project team and executive sponsor must be carefully selected and clearly communicate the purpose of the project to all the bank’s relevant business units and stakeholders, including CIOs, so that they are aligned with its goals and provide support where required to drive the IT transformation forward.

Do your due diligence and stay flexible

The bank needs to understand the old ecosystem and how it will interoperate with the new system and identify whether the old ecosystem is satisfactory or whether it should be replaced. This requires careful due diligence of the current environment. If the old ecosystem is not fit for purpose then outsourcing the project will not improve the situation, it will merely result in the customer outsourcing its problems to another party. The software architecture chosen must also have sufficient flexibility to adapt to changes in scope post contract signature – many IT projects fail because the specification agreed at the start was too rigid and could not evolve with changing requirements.

Find the right supplier

The success of the project will be dependent on the quality of the supplier. An IT transformation project is complex and will pose multiple challenges for the supplier who will need to understand the bank’s business requirements and culture and provide an effective solution to implement.

Make sure your contract protects you

The contract must be drafted to maintain legal and operational accountability whether the bank adopts the single services agreement or multi-vendor framework approach.

Given the cost implications and risk appetite of suppliers, in most circumstances the structure will involve a variation on the multi-vendor approach. However, there is the risk of loss of legal and operational control due to finger pointing between the suppliers.

One way to mitigate this risk is for the bank and all relevant stakeholders to enter into a collaboration agreement that is separate to the IT agreements. The collaboration agreement will describe the suppliers’ obligations therefore providing the bank with contractually enforceable rights against them in the event of default.  Such an agreement should cater for:

inclusive governance regime: the suppliers should be required to notify each other of issues or defaults.  In the event of a default, the suppliers must meet to determine who is at fault, creating a forum for all interested parties. If this cannot be agreed the dispute should be escalated through an agreed procedure and immediately notified to the bank, thereby accelerating the resolution of issues; and
collaboration: an obligation on the parties to work together, share reports and provide assistance with other suppliers that interface with the services.
Key points for inclusion in your contract

Below is a (non-exhaustive!) list of some of the issues to consider during the negotiation of the contract which will make the transformation process much easier to manage:

data migration: transformation projects will involve the migration of data held in multiple legacy systems. Without careful planning and understanding of the data structures in the existing system, the migration plan can be executed incorrectly and this can lead to bottlenecks in the timetable and additional costs.

governance: major projects involve multiple stakeholders with differing interests and methodologies.  The project will need to be backed by a senior member of management and an experienced project team that can drive the process forward and have access to the executive committees in the event of key issues arising.

incentivise performance: termination for underperformance is a nuclear option given the costs associated with re-procurement (even if such costs can be recovered under the terms of the agreement). It is important to include ‘teeth’ in the contract to incentivise performance. This can include service credits for failure to meet agreed levels of performance or the payment of liquidated damages for missed milestones.

group companies: where the project is a global implementation that will benefit banks’ affiliates it should be made clear that they can take the benefit of the services. This can be done by making the affiliates contracting entities, requesting that the bank signs the agreement as agent on their behalf or by stating that the affiliates have rights as third parties to receive the benefit of the services and potentially exercise rights under the agreement.

continuity of service: if the service fails then this will potentially lead to lost profits, reputational damage and potential claims from third parties (e.g. fines from the regulator or the bank’s customers).  The bank should consider building in protections to ensure continuity of service such as audit rights to monitor performance, business continuity and disaster recovery services, exit assistance, source code escrow and a parent company guarantee.
Too big to fail, too big to manage

Disruption within the retail banking sector brought on by changing customer demands means banks will need to invest in IT to improve the quality of their service and update their systems. There is no one size fits all solution to the problem: replacement of IT infrastructure and even the build and migrate model are highly complex and risky endeavours, but are important projects if the banking sector wants to remain relevant.

Overseas, innovation is taking place. Polish banks such as Bank BPH have introduced high-tech ATMs that identify their customers by scanning the vein patterns in their fingertips. In Spain, CaixaBank has announced a “wearable banking” application that permits its customers to follow the stock markets and convert currencies using Google Glass or their smartwatches.

No bank is too big to fail.  But, some banks have perhaps become too big to manage and this has led to a certain amount of inertia and lack of clarity on how best to undertake the necessary transformation journey.  Banks have also tended to view transformation too narrowly, focusing only on the front-end features and not thinking about how these changes will impact the back-end and internal processes. This has led to incomplete transformation projects where front-end systems are replaced but the back-end systems remain untouched and struggle to keep up.

Banks need joined up discussions to decide what changes are required at the front end to meet customer demands and how the back end will need to transform to deliver these changes.

As banks start to embrace cloud-based solutions, shared services models and even the concept of buying software as a utility then the trend could be towards sharing duplicative systems, or licensing platforms on a utility / SaaS basis. This would certainly help to keep costs down and speed up the process of transformation. Recently, Metro Bank opted to use the Temenos T24 core banking system – a cloud-based product that runs on Microsoft Windows Azure platform.

The worry is that rather than innovate now to adapt to the changing environment the banks will continue to put off the changes that are required. But they cannot afford to delay in today’s fast-moving digital market.  If the likes of Google or Apple or Alibaba decide to enter the UK banking market, the traditional banks may not be able adapt their systems fast enough, and customers will move with a few clicks of a mouse or taps on a smart-phone.

Source:http://www.lexology.com/library/detail.aspx?g=419fe34d-3b5b-402a-a9ec-b5f25966464d

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