Financial services companies remain nervous about IT outsourcing,
despite a series of high-profile outsourcing deals in the past 18
months, according to analyst group Datamonitor.
A report shows that most financial services institutions (FSIs)
remain unconvinced of the cost benefits of IT outsourcing. However,
James Adams, technology analyst at Datamonitor and the report's
author, said the success of last week's giant outsourcing deal by
Barclays could change that.
Datamonitor interviewed 172 senior IT and business professionals in
retail banking, insurance and investment across Europe about their
IT spending strategies for 2002 for its IT Efficiency in Financial
Services report.
The report found that respondents' greatest fear with outsourcing
was reduced control of IT systems leading to weakening control over
their relationship with the customer.
It found that cost control was the single most important driver of
IT strategy, but revealed that FSIs typically saw no cost advantage
in outsourcing.
Adams said a third of the respondents are refusing to consider the
idea of business process outsourcing (BPO), but added that this
could change quickly as economic conditions lead FSIs to look for
areas where they can make savings.
"The IT department, has traditionally, been protected from cost
cutting because it provided the means to make savings in other
departments by reducing head counts and other fixed-cost
reductions, " said Adams.
"More recently, Internet-based financial services and customer
relationship management IT has been seen as an enabler in
developing products and services of the institution. Now the focus
is on the efficiency of the IT spend."
Banks and insurance companies will be looking at the success of the
Barclays outsourcing deal as well as the £2.8bn American Express
deal with IBM Global Services.
They will also expect their internal IT departments to start
delivering demonstrable efficiencies and value to the business,
otherwise there could be a new wave of outsourcing from 2003 to
2004, Adams suggested.