Outsourcing quiz
High-level analysis
due diligence fails to identify tell-tale signal of the risks that may threaten future success of the operation
Overemphasis on singular data point
the company realizes immediate labor arbitrage benefits, but the location lacks a deep pool of skilled labor
"Hot Spot" syndrome
the rush of companies to the location created a tightened baseline cost increase significantly
Certification: SSAE- 16 type 2 and ISO 27001:2005
Audit and Compliance. Ensures regulatory compliance with CFPB execution guidelines and best practices
Sourcing model 3
Build-Operate-Transfer -vendor bears risk and owns SLA only pre-transfer -upfront investment -risk of sustainability after tranfer -typically seen in large scale deals
Sourcing model 4
Captive -dedicated centers set up in offshore locations -high focus and strong controls -upfront investment -limited attrition with deep domain knowledge -option to monetize
Sourcing model 1
Direct third-party outsourcing -direct contact with vendor -vendor bears risk and owns SLA -minimal investment -easier to scale -monetization typically not an option
Sourcing model 2
Partial Joint Venture -best of breed model leveraging local partner expertise -early build up of offshore capacity -risk and SLA of majority processes owned by vendor -business continuity
Outsourcing benefits
-Build an asset -variable cost model -cost and efficiency saving -staffing flexibility -focus on core competency -continuity and risk management
Financial drivers for outsourcing
-Centralization & standardization -labor economics -capacity fluctuations -option to monetize
Operational risk areas
-business sponsorship (define objectives) -program management -metrics orientation (lacking) -transition execution
Maximizing offshoring effectiveness
-capital infrastructure should be used more intensively -round the clock shifts- increase use of capital infrastructure -cheap capital equipment -reduced automation
Hidden cost of outsourcing
-cost of benchmarking and analysis -cost of investigating and selecting a vendor -cost of transitioning work -cost of layoffs and managing the relationship -cost of travel and cultural assimilation
Challenges of today's market
-cost pressure -increased risk and exposure -lack of controls -changing market -service challenges
Benefits of offshore outsourcing
-focus on core competence and strategy -cost saving (30-50%) -increased productivity -increased focus on innovation -access best practices & domain expertise -build operational elasticity -accelerated build-up -option to monetize (captive or BOT)
Physical security
-four levels of physical security clearance -empty pockets -paperless -exit clearance
Logical security
-no offshore data -firewalled VPN tunnels -all offshore activity is blocked
Strategic offshoring drivers
-operational efficiency -access to unique expertise -centralization & standardization -improved management focus -handling capacity fluctuations -lower labor costs -converting capital to expense -asset creation
Why banks outsource
-profitability -globalization of banking -industry consolidation & concentration -dispersion of technology innovation -expertise wide approach to outsourcing
Top 7 bank functions being outsourced
1. CRM/ customer service 2. Financing and accounting 3. Payments and billing 4. Knowledge and content management
The Approach
1. Discover (Lead) 2. Design & Implement (Enable) 3. Execute (Deliver) 4. Transform
Three steps to further economic development
1. Encourage the transition to higher value-added activities 2. Identify and exploit their comparative advantage 3. Push forward with reforms that create more competition, entrepreneurship, and flexibility
