Outsoursing in Banks

Traditional Reasons for Outsourcing

Why Companies Outsource?

Advantages

Disadvantages

Determine Your Needs

Identify the Potential Benefits

Identify Potential Risks

Management Time

Outsourcing Can Deliver 8C’s

Issues and Challenges

In order to run the licence, the client will require a server based hardware installation that typically comprises the servers, storage, network, scheme access points, HSMs, DR, professional services, scheme certification costs, and the staff costs relating to the installation project itself. There will also be recurring hardware costs associated with this Licence Hardware Typical licence charge plus annual service fees The client will require additional licences for surround components in order to run (a) the core engine and (b) any other software that forms part of their solution design. The client will incur a large one off cost associated with migration and implementation The staffing model for a licence / in-house operation is different (larger) – e.g. compliance, platform maintenance / development / testing, data centre. The client will have compliance (PCI, payment scheme) costs, vendor management costs, contract costs, capacity planning costs, occupancy and utility costs etc Any comparison needs to take an holistic view of the cost of processing. The License Fee is just one element of the total cost of running a solution in-house There will be a considerable annual spend on ongoing platform development, new country roll out and response to regulatory requirements. In the processing model these are largely included, however in the license model additional spend is required

Breakdown of Present Value Cost Over 6 Years In-house vs Outsourcing – A Cost Comparison Cost* $m License Hardware Software Migration Ongoing Dev Staff Overhead Total Licensing Processing Adv. Processing

Additional Value Of Outsourced Processing “Outsource anything that is not core to your business.” Peter Drucker Processing Benefits Over In- House Financial Technical Strategic Operational Access to world-class technology Continuous hardware upgrades Industry-specific improvements to application software Lower development and regulatory change cost Freedom from maintenance concerns Focus attention on strategic issues Concentrate financial resources on strategic opportunities Leverage provider capabilities Improve “speed to market” Improve customer service Reduce risk Economies of scale Make decisions with real costs versus in-house “variable” costs Lock in long-term costs Improve product profitability Operational task in the hands of industry-specific experts Operates to measurable standards Eliminate internal contention for programming resources Gain access to industry-specific programming skills Reduce staffing levels Gain access to in-depth industry knowledge Revenue Uplift