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Study by Steria Mummert Consulting
Banks continue to use outsourcing
Competition in the financial sector is growing in intensity. Banking institutions are under increased cost-driven pressure to rationalise and this trend is set to accelerate as a result of the current financial market crisis. For this reason, outsourcing is at the top of the agenda of financial service providers. According to the study titled "Models for Success in Outsourcing" conducted by Steria Mummert Consulting in cooperation with InformationWeek, 47% of companies consider the outsourcing of services to be a topic of great interest, while around one in 10 consider it extremely important.
Financial service providers, in particular, expect significant savings from outsourcing. Because external service providers often have lower cost structures, one in four companies surveyed estimate they can cut costs by more than a fifth, while a further 6% estimate the cost-cutting potential to be in the range of 40-50%. As a service, these third-party companies bundle, streamline and standardise business processes. Moreover, by using automated processes, economies of scale are achieved and costs can be reduced significantly.
As the financial market crisis unfolds, outsourcing will most likely continue to gain in importance, as companies have not come close to fully tapping its potential. Over four in 10 companies surveyed indicated there was further potential for outsourcing, while 16% regard such potential as yet untapped.
In particular, business process outsourcing (BPO) is gaining popularity among financial service providers. One in five banks have already outsourced payroll accounting, administrative activities or customer service to outside companies or have specific plans to do so. In addition, approximately 64% would consider BPO. Financial service providers are making greater use of offshoring than companies in other sectors. For instance, four in 10 companies have outsourced various activities to Asian countries such as India.
For banks, the cost-saving aspect is not the only argument that speaks in favour of outsourcing services. 46% of financial service providers use outsourcing because it enables them to increase their focus on core businesses. Four in 10 companies value the special expertise their external partners bring to the table.
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