The New Landscape of Outsourcing in Financial Services
Outsourcing didn’t used to be a welcome subject among CIOs at banks and other financial institutions. However, in recent years, we’ve seen a shift in the prevailing viewpoint. What used to be fast and firm objections have turned into a genuine interest in the practice.
There are many reasons for the sea of change. The two biggest factors have been the pressure on banks to prioritize combined with the growing success that others have had with outsourcing. As CIOs focus their efforts on core retail challenges, there has been a simultaneous growth on the spectrum of what functions can or should be outsourced to a managed services provider.
What’s more is that in today’s market, outsourcing is about more than just the cost savings that have historically driven the practice. As more functions have been outsourced over the years, the expertise of managed services providers has grown considerably. As a result, it is quality and innovation, not cost savings, that are taking the lead when it comes to what functions are being outsourced. And why not? When you look at some of the prominent functions up for consideration, it underscores the truth of the outsourcer’s belief: “Everybody’s back office is somebody else’s front office.”
As bank management widens their lens, there are a few areas we see them tapping managed services providers for greater expertise and support, including:
- Application Services: With blossoming technologies like mobile, social, analytics and cloud, banks are looking for broad suites of application services. And now, the ability of bank CIOs to find advisory, development, integration, application management and platform solutions – all from one source – they can be confident of staying differentiated and competitive while also saving money and driving efficiency in an increasingly agile applications environment.
- Mobility: Mobility is another common candidate for outsourcing, particularly in the area of managing the bank’s mobile environment. Two primary challenges for banks, that vendors are primed to support, are mobile application development and mobile enablement of the workforce. And seeing as how these skill sets already exist in companies outside of banks, it’s hard to see many CIOs deciding to take the time or spend the money to develop this in-house.
- Data Management: As data management becomes more sophisticated and the volume of data grows, it becomes a likelier candidate for outsourcing. Its complexity is greater because of the growing number of technologies that enable banks to gain significant value from their data, both structured and unstructured. Outsourcing partners can ensure that the data is managed and stored in a way that enables these new analytics, business intelligence, and big data technologies to operate at peak efficiency. They are also prepared to provide higher levels of security as these data stores become hacker targets.
- Infrastructure Services: There are a lot of interconnected variables at the heart of any financial institution’s infrastructure, as there is a constant evolution involved with elements such as virtualization, consolidation, incorporating cloud, enabling mobility, accommodating BYOD, and enabling new and modernized applications. Outsourcing this area affords banks an opportunity to integrate and manage all services and hybrid variations uniformly and effectively around the world.
- Cloud: Cloud is a prime outsourcing area, albeit there are obvious concerns around control, cost, and security. But day after day, banks are seeing better service from cloud providers and have consequently become more trusting about moving various workloads from their own servers to hybrid and public cloud platforms.
- Security: With the increasing complexity in IT environments coupled with the increasing onslaught of threats and attacks, outsourcing in this area requires a more holistic approach to security management. Specifically, it’s important to find a provider that can address physical, network, infrastructure, application and data security that is paramount to keeping critical information safe.
There are many reasons why CIOs can get excited about outsourcing some of their key functions to trusted partners. Previously functions that were outsourced after a lot of anxiety and pilots are today performing well at favorable expense levels. In short, nothing succeeds like success. And as bank management remains closely focused on solving their core challenges, it’s comforting to know that there are trusted partners that are able to offer them innovation and agility in other areas.