Outsoursing in Banks
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Traditional Reasons for
Outsourcing
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Why Companies Outsource?
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Advantages
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Disadvantages
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Determine Your Needs
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Identify the Potential Benefits
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Identify Potential Risks
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Management Time
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Outsourcing Can Deliver
8C’s
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Issues and Challenges
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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
Licence
Hardware
Typical licence charge plus annual service fees
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
Software
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.
Migration
Ongoing Development
Staff Costs
Additional Overhead Costs
The client will incur a large one off cost associated with migration and implementation
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
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
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In-house vs Outsourcing – A Cost Comparison
Breakdown of Present Value Cost Over 6 Years
Cost*
$m
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Additional Value Of Outsourced Processing
“Outsource anything that is not core to your business.”-------Peter Drucker
Technical
• Access to world-class
technology
• Continuous hardware upgrades
• Industry-specific improvements
to application software
• Lower development and
regulatory change cost
• Freedom from maintenance
concerns
Financial
Processing
Benefits
Over InHouse
Strategic
• Focus attention on strategic issues
• Concentrate financial resources
on strategic opportunities
• Leverage provider capabilities
Revenue Uplift
• Improve “speed to market”
• Improve customer service
• Reduce risk
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• Economies of scale
• Make decisions with real
costs versus in-house
“variable” costs
• Lock in long-term costs
• Improve product profitability
Operational
• 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