~ There is one area where financial services organisations should be able to focus their resources to create a stable, secure and efficient IT environment. Ganesh Pai, senior vice president and head of insurance at MphasiS, outlines how agile delivery outsourcing is allowing the financial services sector to thrive and move forward post recession ~

The financial services sector is one that is traditionally very robust. Recent events in the global economy have tested that resolve to the extent that these businesses have been forced to re-assess many of the practices that they have lived by for many years.

The long-term effects remain to be seen, but for the immediate future change is essential. Not only do changes need to be made to cost structures to make organisations more efficient, but diversification in the way that services are delivered will help create competitive advantage in an industry where there’s plenty of noise. Agile delivery outsourcing is the way that many of these goals can be achieved.

Why financial services should look at outsourcing more

The immediate benefits to the bottom line – as a result of lower monthly operational costs and significantly reduced total cost of ownership (TCO) – are why financial services institutions are making a play to shift many functions to a service delivery partner. However, there has always been a reluctance to do so in this industry because of the sensitive data that they handle.

Historically, to take advantage of anything beyond very basic outsourcing you had to buy everything just to get what you need – this is the equivalent of buying a whole PC just because you need a new mouse. Now outsourcers are integrated enough to offer financial services providers the whole range of services, but agile enough in their delivery to let them use only services they need. The areas that are especially appealing are many of the back office processes. Not only are these parts of the business where high-cost, low-revenue generating spend occurs, it is also an area where there is largely no sensitive customer data being processed.

Outsourcing some of these functions to a skilled outsourcer can ensure that the quality of job completion remains high, security is maintained, but the overall cost of having those operations in-house is significantly reduced – freeing up operational budget to focus on revenue-generating or more business-critical areas.

Taking advantage of the changing environment with an agile approach

The traditional benefits of outsourcing are reason enough for many financial services organisations to link up with an experienced service provider. However, one of the challenges that these businesses face in today’s market is a rapid rate of change.

Increased competitiveness, a more closely-scrutinised marketplace and a new customer profile becoming more prevalent all point to the need for a change. Banks and financial services providers – traditionally very rigid, conservative institutions – need to increase the agility of their service delivery if they are to move along with some of these changes.

This is where financial service institutions are starting to see the added value to outsourcing.

The frequency and impactful nature of industry regulation shifts the goalposts for financial institutions on a regular basis; risk assessment for any major money decision has increased exponentially as a result of the downturn; and the flood of mergers and acquisitions has significantly altered the landscape for many organisations. The importance of these three factors for outsourcing services and maintenance agreements is that nobody knows when the next significant change is going to happen – but it will and they need to be ready to adapt to it.

Finding the right partner for this is very important. Contractual flexibility is something that not all partners can provide – but something that is increasingly essential in a turbulent market.

Delivering new services requires new skills and expertise to develop the technologies and processes needed to drive them. For instance, one of the quickly growing trends in the financial sector is for mobile apps to gain visibility of the latest market information and also to execute trades with precision timing.

This is a dramatic shift from previous approaches and requires a specific skillset to deliver. This is where an outsourcer with the skills and agility to turn around these projects in short timeframes can significantly boost the competitiveness of any financial organisation.

The future of outsourcing in finance

But if every outsourcing story was a tale of untold joy, everyone would be doing it. There are outsourcing projects that fail to meet these expectations; but, in most cases, there is a common explanation: inflexibility.

Agile delivery of outsourced services significantly enhances the chances that a project will be successful. Agile delivery is even more important for businesses that face fast rates of change or high levels of competition – something that describes almost every financial services institution in today’s volatile market.

Outsourcing to a specialist service provider, adding professional services into the mix, can help to make the whole operation more agile by focusing on the processes that are most valuable to the organisation.