Future Trends in Outsourcing

Murali Santhanam
Industry Executive for Banking, IBM India

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Overview

 BMO Program is on the growth since

its start

 Current India Head Count - Multiple

Hundred

 Multiple Delivery Models

 Legacy to Latest Technologies

 Multi-site Delivery

 Spread across Lines of Business

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Best Practices / Lessons Learned

Best Practices Lessons Learned

 Evolutionary approach through
 Initial high overhead on structuring
collaborative joint definition of
Outsourcing program the program and on internal selling

 A few false starts due to attempts to

 Commitment to meet Outsourcing
extend local contractor models
Objectives
 Initial cultural differences and
 Structured Approach to select work
uncertainties over employment
suitable for outsourcing
 Lost cost saving opportunities due to
 Multiple delivery models to suit
lack of forward planning and pipeline
technology and management culture
management
 Adoption of best-of-breed techniques
 Powerful synergies through treatment
to define common process
of IBM team as an extension of BMO
framework
team
 Arms length approach to effective
Governance
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In the coming years, five key trends will drive the Banking Industry to
become a highly specialized market with tremendous demand complexity

2015 Mega-Trends Implications on Outsourcing

Customers

Customers redefine the rules Faster Time to Market becomes imperative

1 of the game 1
irrespective of the Size

Competition
Universal banks and ultra-focused Global Integration with Specialist Organizations will
2 niche players thrive 2
be a necessity

Human Capital
Changing workforce composition Availability of skilled resources will outweigh all
3 dictates new approaches 3
other considerations for outsourcing

Regulation

Increasing Regulatory Requirements will influence

4 Regulatory burdens intensify 4
the composition of service providers

Technology
Technology improves inexorably Technology will make Globally Integrated Business
5 to enable breakaway value 5
Functions a reality

Source: IBM Institute for Business Value

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Technology will extend the outsourcing arena, from country-centric investments to

true global integration.
“Economic competition in the flat world will be
more equal and more intense….the most
important attribute you can have is creative
imagination.” Thomas Friedman

International Multinational Global

exporting country silos full integration

C 20th C 21st
 Resources are assembled wherever it makes sense
 IT is used to erase geographic limitations.
 Focus expands from local to global.

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Future drivers would focus on Specialization and Skill Availability

Clients’ top drivers for using GD

Lower cost

Access to specialised skills

Faster time-to-market
Improved competitiveness
Access to large pools of resources

Globalisation of business
Improved quality
Access to improved processes
Risk diversification
Access to skilled resources will become intense for operations as
well as IT
Based on Source: RONIN, December 2003

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Financial institutes will need focus following key characteristics to

leverage the next generation offshore model

Business Results Companies have to Specialization &

will become integrate services to Multi-vendor
measure of success deliver business integration
results

Integrated framework Flexible delivery models, Establish vendor

for performance
measurement &
commercial terms,
focus on innovation
and continuous
improvement through
risk reward models
Industry domain & agnostic sourcing
technical skills promote strategy through
synergies across collaborative
business process governance model that
enablement, application promotes synergy,
development and reuse and
infrastructure accountability
management

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Summary of Outsourcing Trends in Financial Services industry

Early Stages Growth Stage Next Generation
Flexible resource model, Reduce time
Key Drivers Cost Containment Integral part of IT strategy
to market
Contractual Skill / resource fulfillment
Deliverable and milestone based Outcome based
Commitment based
Service
Client Owned Scope based Vendor Owned SLAs extend beyond IT
Levels
Team
Vendor providing skills Vendor owning delivery responsibility Multi-vendor Integration
Composition
IT and Focus on Internal IT
Business alignment. Vendor used for Outsourcing vendors align to LOB Enterprise alignment
Alignment skill augmentation
Financial Risk sharing, Profit sharing,
Rate Card Fixed Price, T&M
Model Unit Pricing
Collaborative across client and vendor Integrated across multi-vendor
Governance Client dictated
[Metrics driven] and client [KPI driven]
Benefits
Labor arbitrage, Utilization Rationalization and
realized Process improvements, Productivity
improvements optimization across enterprise
through
Enterprise wide strategy to
Sourcing LOB Aligned and segregated by IT
Unstructured integrate all IT operations i.e.
Strategy operations i.e. ADM, BPO, Infra
ADM, BPO, and Infra
Sustainability through
Connectivity, Environment / Industry skills, Redeployment of
Challenges innovation and Continuous
8 data access, resources
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Taking a step towards future - Bank of Montreal

 Business Results oriented approach for reaping the benefits of outsourcing
- Measure success of Outsourcing Program through Business Drivers
- GR PMO to evaluate all new IT projects against Business Drivers
- Set up measurement systems to measure achievement of business drivers
 Create Integrated Teams for enhanced results
- Joint review of IT Plans & focus areas
- Annual face-time between BMO managers and IBM teams
- Training Managers on effective use of remote teams, culturally diverse teams
 Explore differentiated banking solutions offered by IBM through Global teams
- Core System Transformation
- Functional Test Solutions
- Enterprise SOA Solutions

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