Banks creating the roadmaps for the next phase of IT outsourcing

The recession hit the banks the hardest but it is the banks that are leading the way in the IT recovery and creating roadmaps for the next phase of IT outsourcing.

According to BG Srinivas, European head at Indian outsourcing giant Infosys, the company’s banking clients are leading a new wave of outsourcing contracts.

I met up with BG yesterday. He says now that banks have sorted out their leadership changes, decisions are now being taken.

Banks are always pioneers when it comes to IT and outsourcing so it is interesting to see what the banks are actually doing.

The banks are currently spending money on large changes that have resulted from mergers and break-ups. This involves a lot of process and system integration. The IT service providers are working closely with the banks on this.

But there are interesting trends that are likely to be emulated in other sectors.

Perhaps the most interesting is a trend for banks and their IT service providers to share their strategic plans to enable them to plan together.

This will help end user businesses because the service provider can pass on advice about how the customer can reach its goals, because it probably already has the experience with other clients. It will mean suppliers can respond better.

BG also told me the banks are currently reducing the number of service providers they work with. He says typically banks want 2 or 3 strategic partners. The UK and US banks are leading this as a result of them being “open to managed outsourcing.”

Both the strategies are attractive to CIOs and there service providers.

Sharing strategies means the client is able to plan better in the knowledge of what partners can do and will get a faster response to a call for action. Meanwhile the partner will be better prepared and attracted by a strong and probably long relationship.

The benefits of a consolidated IT supplier base has obvious benefits for the customer and suppliers. There will be no need for the large tendering process and the customer will already have an in-depth knowledge of the suppliers. So the procurement process is streamlined.

But this could be a dream to far. It relies on a high level of trust and according to some research I wrote yesterday this is in short supply between IT professionals and IT outsourcing suppliers.

The research from Lieberman Software revealed that 62% of IT professionals found that IT outsourcing contracts end up costing more than expected. Even more shocking is that 77% believe that their outsourcing partners are inventing work to increase their revenues.