Tue 18 - Thu 20 November 2008 - Frankfurt am Main, Exhibition Grounds, Hall 5.1
Outsourcing:
Opportunity or crisis for the IT sector?
26 October 2004, Frankfurt - IT services worth a total of € 10 billion have already been outsourced within Germany.
By 2008 this figure is likely to rise to € 17 billion. Outsourcing, however, cannot always solve all of the problems facing businesses. Issues can also arise, for example, in relation to management and communication targets. The European Banking & Insurance Fair (E.B.I.F.) presents integrated solutions that can help managers to avoid mistakes of this kind.
The increasing downward pressure on costs and the vital need for greater profitability is causing more and more banks and insurance providers within Germany to consider outsourcing their IT services. According to a study by the A T Kearney Group, in fact, European financial institutions have some catching up to do in this area. If they are to remain profitable in the face of international competition, however, they will surely be unable to avoid taking this strategic step before long. As well as IT services and transaction processing, manpower-intensive activities, such as billing and call centre operations, are also highly suitable for outsourcing.
The three variants of outsourcing – full outsourcing, "outtasking" and "offshoring" – are currently used to differing degrees in Germany. Full outsourcing – the outsourcing of complete business processes – and outtasking, which involves giving targeted support to particular aspects of IT operations, have so far proved more popular within Germany than offshoring, where administrative tasks are transferred outside the country. This is largely due to fears over possible language barriers and increased downtime. Shuba Sridhar, Regional Manager at Torry Harris Business Solutions in Bangalore, India, states that these issues are not reflected in practice, however: "Language problems and cultural differences used to be demerits of the yesteryears. But that is long gone and the vendors today learn the customer languages and arrange workshops for their employees on the culture in the customer company.” This point is also underlined by Arnab Gosh, Chief Technology Officer at Torry Harris: "The real challenge is to ensure that the relationship develops as a partnership based on trust and value rather than a customer-vendor interaction model." In the US, offshoring has already proved its effectiveness as a strategic tool. And European financial services providers are also beginning to find the topic of greater relevance. According to a study by the A T Kearney Group, offshoring can help businesses achieve savings of up to 30% over the mid to long-term. Up to now, however, banking and insurance providers on the continent have been unable to fulfil the system requirements for large-scale offshoring.
Domestic outsourcing and outtasking, in contrast, are already major growth areas for the IT sector. Forrester Research, for example, predicts that suppliers of IT outsourcing services will enjoy growth this year of 14%. However, with the placing of tasks to external service providers difficulties can occur: Many businesses underestimate the additional organisational challenges posed by the process of outsourcing activities. Jochen Maier, Business Development Manager Advanced Services at Sun Microsystems, identifies the reasons as follows: "Insufficient preparation on the customer side often causes significant difficulties for effective outsourcing. It's not enough for a company simply to hand over its own problems to an outsourcer.” Maier therefore sees outtasking as offering better opportunities for growth in the short term: "We are noting a growing tendency for businesses to seek out partners for specific operational areas in a highly targeted way."
As well as the potential for savings, the decision to outsource business processes is also largely motivated by the extra flexibility provided to those involved. "We are seeing that businesses are increasingly tending to break up their existing value creation chain – their portfolio of products and services in the financial services sector – into discrete units," says Svend Erik Nielsen, Solutions Sales Executive with IBM's Financial Services Sector team. "For each of these individual business components, an optimum financial model can be developed, so that sourcing strategies can be implemented on a case-by-case basis – whether in terms of insourcing, outsourcing or continued in-house provision of services." Businesses that outsource processes can lower their fixed costs and, where necessary, investigate the benefits provided by the IT services they use. "In order to decide whether to pursue a strategy of "make or buy", organisations need to understand their own IT infrastructure as fully as possible. Only then can clear requirements be given to the service provider," says Georg Unbehaun, spokesperson for Unilog Systems Integration. Specifically for the financial services industry, Unilog has a tool available known as the "RightSourcingCheck". This is used to analyse the customer's situation and from this produce clear recommendations for action in respect of sourcing strategy.
Particularly in the field of IT for insurance providers, outsourcing faces difficulties as a result of the lack of standardisation. The insurance industry, however, will surely be unable to put off outsourcing some of its activities to external suppliers for much longer. In order to compare business processes as necessary, Unbehaun proposes that a "sourcing management" system be used, whereby all external partners are subject to the same controls, and the services to be provided are defined transparently and cost-efficiently.
Unilog Systems Integration – as well as Torry Harris Business Solutions, Sun Microsystems and IBM – are all represented at this year's E.B.I.F. This leading exhibition in the financial services IT sector provides a showcase for every possible aspect of integrated outsourcing solutions.
