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The future of sourcing in wholesale banking

Outsourcing was once vaunted as the golden ticket to reducing costs. The reality has been somewhat different. Application complexity, siloed architectures, poor data management and bad business processes were just being passed on.  What resulted was wage arbitrage and less overhead costs, however it leaves behind complexity, silo based applications, too much legacy and the associated data issues.

Transformational sourcing takes a different approach. It concentrates on improving the business performance of IT and decreasing the total cost of IT on a sustained basis. It’s about ‘running IT as a business’.  The wholesale banking industry is just starting to sit up and take notice.

So where should wholesale banks begin their journey? They should look to partners to implement change and turn to cloud and SaaS-based services with business and IT governance to improve performance.  For some this is a big step so it’s best to take a considered approach. One way is to try a limited pilot period with a couple of providers to test out the assumptions and benefits. By engaging with partners in real-time you can see which ones meet your needs. The second step is talking to other clients who have made the change and see where they are doing business.

Transformational sourcing offers a real opportunity to move the business economics forward by leaps and bounds. Banks need to find new ways to significantly reduce their costs while maintaining or improving IT performance. Then they can focus on specific strategies like fine-tuning customer services and improving the customer experience. 

The future of wholesale banking is customer differentiation. Focus on what the bank does well and ‘transform’ the rest to a trusted partner. The result? Banks benefit from a successful outcome that transforms their business, reduces cost and most importantly actually delivers.


Comments: (1)

A Finextra member
A Finextra member 04 November, 2013, 14:45Be the first to give this comment the thumbs up 0 likes

Hi Penny,

I agree, outsourcing has (and still is) seen as a panacea for the perceived high cost of IT in the current climate of reduced revenue's.  Outsourcing of your IT infrastructure and services needs to be very carefully thought out and managed (you will still need many of the core competencies of the IT teams).

Banks typically think long and hard about the physical location of the HQ building and branches, close to transport links, the "correct" business location, prestige building etc…. They need to think just as much about where they locate there IT infrastructure. Can you connect to a diverse range of network to connect your offices, can you access multiple cloud vendors that offer, SaaS, PaaS and an every expanding range of other services. How can you ensure your presence on the web is as fast and reactive as customers are now expecting and providing that same service on the increasingly important social sites? When steaming video and other digital content, location aware services and emerging technologies like beacon become mainstream overnight how are you placed to take advantage…

Sadly, many of today’s bigger companies still fall for the “one stop shop” story and believe that they can save money and retain or even improve the service they offer… Outsource, yes, but outsource to the proper people and do it in a controlled and managed way that means you can still retain control of the important parts you need to.


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