Banks are already familiar with outsourcing various IT functions, but a new area has become ripe for banks to outsource to technology partners - their business and technology change processes, a new white paper from Capco, a consultancy, argues. Business and technology change processes are the projects and functions within the bank that help drive the ability to innovate new products, services and processes that help the bank do things like meet new regulations, replace legacy systems and build out new businesses. The white paper says that the typical in-house approach for managing and executing these “change” projects and processes is inefficient, costly and in need of improvement.
The paper contends that a new outsourcing model it calls “changeSourcing” should be adopted by banks to help them become more innovative by handling their business and technology change needs more effectively and with less cost. Most banks currently assign teams responsible for business and technology change projects to different areas of their organization. This model doesn’t work though because of the specialization that is required to understand the business and technology needs of each line of business, the paper says. If a bank suddenly needs to undertake a big business or technology change project in one part of the bank, the usual response is to shift staff from change teams in other parts of the organization, the paper says. But those staff from elsewhere other parts of the bank may not have enough understanding or experience with the line of business that they’re now working in.
This fragmented approach to staffing for change projects prevents banks from seeing their full resources that can be brought to bear on such projects, says Mark Reeves, a partner at Capco and author of the white paper. “Many organizations are lacking the ability to identify who they have [working] in this change capacity,” he explains. “They’ll say, ‘We have about 500 people working in change projects and processes.’ But then some of those staff have titles that have nothing to do with change.”
Additionally, the paper points out that personnel who work in business and technology change projects tend to receive very high compensation because of their specialized skills. And the tight budgets that exist across the industry can put the investments needed to follow through on major change-oriented projects on hold, delaying projects and costing the bank more down the line.
An outsourcing - or “changeSourcing” - contract with a partner who can provide the personnel for these projects and processes would be more agile and cost-effective in meeting the needs of a bank, according to the paper. Capco, which is owned by bank technology vendor FIS, already has a such contracts with a couple of bank clients, according to Reeves.
An outsourcing contract for change projects offers the ability to put a fixed rate on a budget item that can fluctuate and spike when major new compliance needs to be met or legacy systems replaced, the paper says. If a major project has to be undertaken in a particular area the contract partner can provide the extra personnel with expertise in that area, rather than a bank having to shift resources from other parts of the organization.
“Banks have been dealing with tight budgets for a while and the costs [of change projects] are huge but everyone ignored the change cost line. Business and technology change was just something everyone had to invest in. But we’ve created an offer to jump at that cost line,” Reeves remarks.
Banks engaged in "changeSourcing" contracts also improve their change-oriented capabilities and processes by gaining a single view of the resources they can devote to those areas, Reeves says. "ChangeSourcing" providers can focus on growing talent that specialize in change projects, something that is not a priority for most banks, he adds. And the provider also delivers an outside view to examine the efficiency of the bank’s current protocols for managing and executing change projects.
Reeves advises that banks interested in pursuing the changesourcing model should start with smaller projects that have an impact but entail little risk for the bank. “You also have to evolve the contract as a partnership over time. That takes maturity,” Reeves suggests.
Reeves says that "changeSourcing" will also grow more maturity within the organization in terms of its culture concerning change projects and innovation. “Those staff that we’ve worked with are more excited and passionate about their ability to execute change because they see a more consistent view of their change capabilities. That has a positive effect on their ability to share and work together cohesively,” he notes.