You get what you pay for

Clients and suppliers need strong complementary capabilities to make IT outsourcing relationships successful. Extensive studies have shown this to be a fact. The offshore factory with the cheapest service model doesn’t normally provide the best results.

There is little need to acknowledge how difficult the current economic situation is at present. But we do need to understand and address the challenges that it is presenting to businesses across the industry. One such problem is the lack of IT staff in banks to manage their internal IT systems as well as to innovate.

The technical failure recently seen at RBS is yet to be analysed, however there is a widely reported perception that the software update that went so badly wrong was fairly quickly identified and patched by the bank; however, it was the absence of a contingency plan to deal with the knock-on issues from the initial computer failure that was more worrying. This, to me, reinforces the studies that demonstrate the need for the external service provider to have a high competence in the domain, as well as in service provision.

Research shows that banks consider outsourcing IT services not only to reduce costs, but to focus on core capabilities, as well as to gain a resource ‘skills injection’, including expertise and superior technology needed to improve IT performance. This is a sound policy. Many banks use legacy IT applications that are continually adapted to deliver contemporary services, and the knowledge to manage the day-to-day operations as well as problem solving are key to a good delivery service for the bank.

A specialist application management service provider can manage the systems in the IT domain as well as augment the incumbent skills. This combination of human and technical resource management can reduce the reliance on individual contractors, drive efficiencies and add value. The bank’s own employees become flexible and thus able to work on innovation and value-add services.

In a time when banks are looking to maximise business agility to achieve innovation, it surely pays to get the best people to manage the run-the-bank legacy, doesn’t it?