IT outsourcing in the banking sector – what’s the big deal?

It is no surprise for those who work in the technology and banking sectors: banks often make large use of outsourcing and managed services for their IT. It is a cost-efficient solution that can help them remain competitive within the market with easy access to the best skills, technology and processes available. However, banks tend to be wary of announcing this practice to the world as they fear customers will think their personal and financial information may be put at risk, and won’t trust them with their money.

Since the NatWest/RBS/Ulster IT glitch became public there has been a lot of speculation around the origin of the issue. The banking group has tried to remain vague while focussing on reassuring their customers, while people took to online forums and social networks to make accusations towards the bank’s IT management and sourcing choices.

The banking giant was in fact accused of hiding the fact that the problem was possibly linked to their use of offshoring, as recent job ads for the support of one particular system which was thought to be the cause were found on recruitment websites in India.

But if the glitch had been caused by an in-house team member, would it have caused less of a reaction? What about an in-house IT Service Desk, but managed by an external service provider? Rather than pointing fingers at ‘outsourcing’, the real issue might be ‘bad sourcing’ or ‘bad IT management’. As this example might have shown, offshoring to save money might actually create more costs due to many factors, such as cultural differences, lack of control, different laws related to data security, and so on. A managed service, where IT is retained in-house and simply managed by a trusted third party, can be a much safer option.

Perhaps if there was more information on outsourcing, customer culture could change and they, too, could start to see outsourcing like a good thing, an improvement, a cost-efficient solution rather than a threat.

A recent survey by the National Outsourcing Association (NOA) found that 80 per cent of UK citizens believe ‘outsourcing hinders British businesses’. However, only 27 per cent of UK citizens associated ‘a local computer company providing IT support to small businesses’ with ‘outsourcing’, while 58 per cent thought ‘a bank opening a call centre in India’ was an example. This clearly means that outsourcing is mainly associated with offshoring, which is only one possible way to outsource a service or function. But there are many other, safer solutions that still use UK resources, such as managed services, co-sourcing and shared services – some even allow the organisation to keep staff in the same office.

So on one side, banks should probably be more transparent on their use of IT outsourcing, so that customers can get used to the fact that its use is quite common. It is important for bank customers to know where their data is stored, who has access to it and what the risks are.

On the other, it is important that people are being made aware of what outsourcing is, what types exist and what benefits this practice can bring. Banks should clearly explain what measures are in place to ensure their personal and financial information is not accessed, stolen or lost and why using an outsourced or managed service can be a benefit for them as well, improving their banking experience by maximising the skills and services of outsourcers.

 

Jon Reeve, Principal Consultant

This article appeared on Director Of Finance Online:

http://bit.ly/PAAeia

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One Response to “IT outsourcing in the banking sector – what’s the big deal?”

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