When considering whether to pursue an outsourcing business model, decision-makers need to contemplate four things, says Michael Porter, a Harvard Business School professor. These can easily be put as questions:
- Can the activity be performed cheaper or better by suppliers?
- Is the activity one of the firm's core competencies from which stems a cost advantage or product differentiation?
- What is the risk of performing the activity in house? If the activity relies on fast-changing technology or the product is sold in a rapidly changing market, it may be advantageous to outsource the activity in order to maintain flexibility and avoid the risk of investing in specialized assets.
- Will outsourcing an activity result in business process improvements such as reduced lead-time, higher flexibility, reduced inventory, etc?
Now for the hard questions
Porter's four questions are only a starting point for an FI thinking about outsourcing financial services. Determining what an outsourcing model should look like, what it should include, how it should operate, who should run what — this is where the questions get sticky.
And then, once the structure of the outsourcing model is complete, there's the task of segueing seamlessly into it. Can the program be implemented without disruption to customer services? Will it achieve the desired results? Will it make any difference at all? This is when the questions start to keep a decision-maker up at night.
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ATMIA Canada Conference 2013: Sessions to Inform & Educate
Payment industry leaders will offer insights on how to succeed in today’s evolving landscape. Topics include best practices, fraud/security, future trends, new products, potential partnerships, and a regulatory update. Register.
On Tuesday, Nov. 20, at 2:00 p.m. EST, ATM Marketplace will host a live webinar sponsored by Diebold Inc., "Financial Services Outsourcing: Five Steps to a Successful Partnership."
Presenters in the webinar will include Jaroslaw Knapik, senior analyst for financial services technology at Ovum, Andrea Tomasian, director of integrated services at Diebold Inc., and Michael Dittmer, senior vice president and IT manager at American Momentum Bank.
Even hard questions have answers
Together, they will cover the three key aspects of financial services outsourcing:
Analysis — taking a detailed look at the seven benefits that can accrue to an FI that switches to an outsourcing model, benefits that go well beyond just cost savings.
Strategy — offering an in-depth view of the development phase of an outsourcing project, and the five critical steps to ensuring that it will achieve desired, and measurable, results.
Implementation — providing a case study that gives an inside look at the process from the FI point of view, from business issues to solutions to results that can be observed and measured.
Webinar participants will learn why it's best to have a single point of contact in an outsourcing agreement, and what essential services and safeguards this contact should be able to provide.
Registration for the live webinar, "Financial Services Outsourcing: Five Steps to a Successful Partnership," is free and open to all.
For more on this topic, visit the outsourcing research center.
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