With financial institutions going increasingly global, it is not surprising that they expect their service providers to do so as well.
Two bankers, a former banker turned consultant and an executive at a global service provider that counts many banks among its clients took to the stage at this week’s Nearshore Nexus event to discuss how banks use outsourcing to ease their entry into new markets and refine their global strategies.
Juan Ruiz Coronado, a senior vice president at Citi, said that for global banks – or those with aspirations of going global — outsourcing is only part of a broader strategy that also encompasses shared services organizations and captive centers.
“Without that fundamental understanding, it’s hard to get benefit from outsourcing,” he said.
In particular, he said banks must carefully evaluate which skills they want to keep in-house and which should be provided by service provider partners. Citi, which serves customers in more than 140 countries, uses a blend of onshore, nearshore and offshore resources.
Such a blend of resources is not uncommon – at least among large banks – and can add management complexity and overhead. It can also result in the kind of fragmentation that could negatively impact a global strategy, said Kurt Pearson, a senior vice president at Wells Fargo Bank.
“Without a centralized governance group, you can end up operating as multiple small businesses,” Pearson said.
Such a group can work with a bank’s service partners to identify and target “efficiencies and synergies that wouldn’t be viable for individual business units,” he said. A governance organization should include experts in risk management and vendor management, as well as legal advisors, Pearson advised.
Selecting partners with a broad range of skills can also counteract the fragmentation that can occur within any large company, but especially global ones, said Ankur Prakash, vice president and chief operations officer for TCS Latin America. Some 43 percent of the India-based service provider’s revenues last year came from the banking/financial services/insurance vertical.
“It’s possible for you to find a provider to do one job or one initiative,” Prakash said. “But what will happen when you need to integrate it into your larger strategy? You risk creating an island of knowledge within your company.”
While cost is a part of any services strategy, for companies with mature service strategies it takes a back seat to factors such as accessing talent with desirable skills, mitigating risk and entering new markets, said Adrian Hee, a former managing director at Wells Fargo and now executive principal at CoastPoint Consulting.
Turning to Transformation
Banks should not focus too heavily on any one element when evaluating providers, whether it’s cost or talent availability, Prakash said.
“If you worry only about time zone, you would do everything where a company is headquartered. If you are concerned only about cost, you’d do everything from a remote village in India. If you consider only talent availability, you’d do everything from Boston where so many strong universities are located,” he said. “You need to get the right mix of time zone, cultural affinity, cost and quality.”
Coronado said the right service providers – those that have capabilities that align with company strategy — can help banks step up their global game and shift their focus from operational improvement to business transformation.
“Providers need to help their clients think that way,” he added, but clients must do their part by sharing their strategic objectives. “You don’t want to just say you want a project completed in a certain time frame without giving the context of why you need it and how it will affect your outcomes,” he said.
It all goes back to business objectives, Prakash said. “You can find a company that will develop an application for you. But your end objective is not just developing an app. Your ultimate objective is to gain market share. You have to look for a partner that can guarantee the success of that app and help you achieve that goal.”