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IT and Business Process Outsourcing in North American Financial ServicesProduct Type: Market Research ReportPublished by: Datamonitor Published: August 2004 Product Code: R313-6952 Description IntroductionOutsourcing has become one of the key strategic options available to banks and insurers not only to cut costs but to improve operating efficiency. Offshore application outsourcing and business process outsourcing are amongst the more recent additions to mainstream thinking causing controversy both in terms of employment and strategic viability. Scope The report covers North American financial services across retail banking, insurance (life and general) and financial markets In terms of outsourcing services the report analyses three main markets: infrastructure, application and business process outsourcing Analysis of FSI attitudes and outsourcing plans draw amongst others on 100 interviews with senior IT/business professionals in North American FSIs Highlights While strategic outsourcing is an important trend, selective outsourcing has become increasingly important at the expense of wholesale IT function outsourcing as vendor performance and manageability issues have become increasingly important to FSIs. The dominant driver for outsourcing is moving from cost control/ reduction towards a more balance spectrum of drivers. Vendors will increasingly need to be able to combine transformation and revenue-growth supporting skills with cost reductions to win deals. Vendors must develop credible IP-backing for their service offering in line of business specific BPO either through in-house developments or strategic partnerships as proof of offering and as means of delivery. Reasons to Purchase Take advantage of one of the fastest growing vendor opportunities in the financial services market Understand the drives and inhibitors of outsourcing in the financial services sector to improve marketing and sales efficiency Improve understanding of own relative market positioning and FSIs' perception of the competition to enhance sales conversion rates Table of Contents TABLE OF CONTENTSCHAPTER 1 EXECUTIVE SUMMARY 3 Action points 3 Customer focus 3 Competitor dynamics 4 The future decoded 5 CHAPTER 2 ACTION POINTS 13 Action point 1: While strategic outsourcing is an important trend, selective outsourcing has become increasingly important at the expense of wholesale IT function outsourcing, as vendor performance and manageability issues have become increasingly important to FSIs 13 Action point 2: The dominant driver for outsourcing is moving from cost control/ reduction towards a more balance spectrum of drivers. Vendors will increasingly need to be able to combine transformation and revenue-growth supporting skills with cost reductions to win deals 14 Action point 3: Vendors must develop credible IP backing for their service offering in line of business specific BPO, either through in-house developments or strategic partnerships as proof of offering and as means of delivery 15 Action point 4: Flexible global sourcing frameworks will be increasingly essential to fulfillment in both application outsourcing and BPO services, given more strenuous cost savings demanded by FSIs through this area. Vendors will be required to offer a multi-sourcing strategy that combines on, near and off shoring dependent on area and FSI requirements 15 CHAPTER 3 INTRODUCTION 17 What is this report about? 17 Who is the target reader? 17 CHAPTER 4 MARKET CONTEXT 18 CHAPTER 5 CUSTOMER FOCUS 21 Introduction 21 Key findings 21 IT strategies in North American financial services 23 Outsourcing in a changing sector 25 Benefits achieved are underwhelming 25 Outsourcing concerns: partly a communications challenge for vendors 27 Infrastructure and application outsourcing 29 Business process outsourcing 31 Barriers to offshore outsourcing 33 Offshore outsourcing take-up plans 35 Conclusion 36 CHAPTER 6 COMPETITIVE DYNAMICS 38 Introduction 38 Key findings 38 Vendor coverage areas 39 Top infrastructure outsourcing vendors 40 Top application outsourcing vendors 42 Top BPO vendors 44 Vendor dynamics 46 CHAPTER 7 THE FUTURE DECODED 48 Introduction 48 Key findings 48 Financial services outsourcing 49 Infrastructure 50 Retail banking 51 Insurance 52 Financial markets 52 Application 53 ASP 54 Development & maintenance 54 BPO 55 Vertical business process outsourcing 56 Horizontal process outsourcing 57 CHAPTER 8 APPENDIX 59 Outsourcing spending definitions 59 Infrastructure outsourcing 59 Application outsourcing 59 Business process outsourcing 60 Abbreviations 60 Forecasts and assumptions 60 What currencies are used? 60 How has inflation been treated? 61 Research methodology 61 Product and services definitions 61 Coverage of secondary and published sources 61 Primary industry interviews 61 Forecast methodology 62 Data finalization, cross-checks and verification 62 Data inconsistencies 62 Vendor market share numbers 63 Future readings 64 SPP writing team 64 LIST OF TABLES Table 1: North American financial services outsourcing segmentation, 2006 and growth 2003-2006 49 Table 2: Infrastructure outsourcing growth in North American financial services, 2003 - 2006 51 Table 3: Application outsourcing growth in North American financial services, 2003 - 2006 53 Table 4: Business process outsourcing growth in North American financial services, 2003 - 2006 56 LIST OF FIGURES Figure 1: Datamonitor financial services outsourcing taxonomy 18 Figure 2: Infrastructure outsourcing overview 19 Figure 3: Application outsourcing overview 19 Figure 4: Business process outsourcing overview 20 Figure 5: IT investment drivers in North American financial services, 2004 23 Figure 6: Short-term future outlook for financial services IT investment strategy 24 Figure 7: Vendors are not matching expectations of FSIs in outsourcing relationships 26 Figure 8: Outsourcing concerns in North American financial services 27 Figure 9: Planned take-up/ FSIs considering outsourcing 29 Figure 10: BPO take-up remains at a low level, but growth prospects are strong 31 Figure 11: Key offshore outsourcing concerns 34 Figure 12: What is your current strategy with regard to offshore outsourcing? 35 Figure 13: Vendor coverage overview 39 Figure 14: Main infrastructure outsourcing vendors in North American financial services, 2003 41 Figure 15: Main application outsourcing vendors in North American financial services, 2003 43 Figure 16: Main BPO vendors in North American financial services, 2003 45 Figure 17: Vendor positioning in North American financial services outsourcing market 46 Figure 18: North American financial services outsourcing segmentation, 2006 and growth 2003-2006 49 Figure 19: Infrastructure outsourcing growth in North American financial services, 2003 - 2006 50 Figure 20: Application outsourcing growth in North American financial services, 2003 - 2006 53 Figure 21: Business process outsourcing growth in North American financial services, 2003 - 2006 55 |
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