Finextra has opened registration for a one-day conference on 4 June that will look at how the ongoing financial crisis is affecting the globalisation of business models, organisational structure, technology and operations in banking and financial markets.
A recent breakfast roundtable, hosted by Finextra and IBM under Chatham House Rules and attended by outsourcing and offshoring management professionals from leading banks, highlighted a number of trends that will be discussed further during the event in June:
- Just as firms were beginning to look more strategically at outsourcing as a value creator rather than pure cost reduction exercise, the crisis hit - and now again it's all about cost. But as banks are surer of their own survival over the next year they will again start looking more long term.
- There is a focus now on building flexibility into the models and contracts to deal with volatile times, often leading to contract renegotiation.
- Offshoring and outsourcing of knowledge-based processes is being spurred by post-merger integration issues in the banking sector.
- But joint ventures and captives are less in-favour right now. At the same time, basic staff augmentation and wage arbitrage isn't enough to deliver real benefits to financial organisations. So traditional offshore and third-party outsourcing relationships are giving way to managed service models, hybrid models and virtual captives.
- With internal job cuts, some banks are now increasingly skewed to outsourced positions as a percentage of overall staff resource.
- The involvement of risk management professionals in outsourcing arrangements is growing. Particularly in BPO arrangements. And this is mostly beneficial.
- In the current climate it's a big challenge to ensure productivity savings of existing contracts are achieved - especially where those contracts are long-term. This is sometimes exacerbated when there is conflict between multiple providers to the bank.
- There is a growing awareness from suppliers and consumers of outsourced services that they need to focus on change management and efficient processes after the contract is signed. They can't just sign and forget. Value creation dialogue, up to the highest management level, is very useful here.
- As outsourcing moves up the maturity curve, it's also become apparent that it's better to manage from the bank side and deliver from the supplier side to the spirit of the contract, rather than the letter of the contract. There should not be too much focus on particular SLAs - more on the kind of value that can be added, or performance trends over time, rather than just measuring against pure numbers on a monthly/quarterly basis.
- The trend towards virtual captives is seeing a bank's own staff working alongside third party staff in the third party centre. This greater collaboration also helps with communication and motivation.
- Motivation is an important issue, because the carrots and sticks available to help move the relationship in the right direction have changed. Previously, banks could use growth and the possibility of more business in future as a carrot to suppliers. Now it's - "Do a good job and you might retain our business, or be cut less than others." Incentivising is harder.
- Upcoming regulation is, as always, difficult to plan for. But one thing organisations can count on is that they'll have to allow more time for examination and audits - so this should be factored into any contracts being negotiated now.
The event will feature keynote presentations and panel discussions looking at outsourcing trends in financial markets and transaction banking, best practice in outsourcing models and relationship management, and how geopolitical and economic trends are driving the development of new and existing offshore centres.
Conference speaker and exhibition sponsor information will be announced next week at www.finextra.com/outsourcing