Rolls-Royce has the world's broadest portfolio of jet engines. So it might come as a surprise that Rolls-Royce does not sell jet engines. Rolls-Royce sells the hot air that comes out of the back of the engine — i.e., uptime.

The company recognized this fifty years ago and introduced "Power by the Hour," an outsourcing program that 80 percent of its customers use today.

What Rolls-Royce began to provide in 1962, retail banks are beginning to demand today: outsourcing services that increase efficiency and reduce operating costs.

The Nov. 20 webinar, "Financial Services Outsourcing: Five Steps to a Successful Partnership," hosted by ATM Marketplace and sponsored by Diebold Inc., offered a look inside outsourcing from three points of view: consultant, provider and FI.

Consultant

Presenter Jaroslaw Knapik, senior analyst for financial services technology at the IT consultancy Ovum, started by checking down a seven-point list of outsourcing drivers ranging from "external supplier expertise on tap" to "overall cost reduction."

But, he said, successful outsourcing depends upon careful due diligence, comparing all the available vendors in the marketplace. "You're looking at innovations, looking at existing client relationships," he said.

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"You're looking at breadth of offerings, client types, delivery of excellence. You are looking at the ability to integrate and create interfaces … [I]f there are some specific areas that you're most interested in, then you have to look especially for client references — what are clients of theirs saying?"

Knapik presented graphics that offered a dramatic contrast of the "evolved" business model of service management — a patchwork of functions added over time — with a new service model of "integrated service maintenance" from a single vendor, which allows an FI to focus on its core business — serving customers' banking needs.

Provider

Andrea Tomasian, director of integrated services at Diebold Inc., described in detail the five steps of a successful outsourcing program:

1. review strategic objectives;
2. identify the processes to outsource;
3. define the processes to outsource;
4. explore partnerships; and
5. measure results.

These five steps are the foundation to an outsourcing effort that delivers the desired benefits: reduced operating costs, advanced technologies, and peace of mind. And underpinning it all is partnership with the right provider, Tomasian said.

"[A] lot of the more sizeable, sophisticated suppliers in this industry can come in and talk to you," Tomasian said. "I would suggest inviting them in and investigating what they're doing in the space, what their successes have been. Look at case studies. Call those [customers]. There's really a lot of assistance."

Financial Institution

Michael Dittmer, senior vice president and IT manager at Florida-based American Momentum Bank ($1 billion in assets), related his bank's experience in developing and implementing its outsourcing plan across branches in Florida and Texas.

To streamline operations in both states, AMB chose to outsource data processing, item processing and "a good mix of technology services" — handing off end-to-end provision of electronic security, ATMs, and other equipment needs to Diebold

Diebold's integrated services work as an extension of the bank's in-house IT staff, allowing AMB to remain competitive with much larger banks without having to hire an enormous IT team or sacrifice expertise, Dittmer said.

"If we did not choose to go down this path with outsourcing in 2006, we would have an in-house IT staff that would probably be so large — [and still] without the level of experience that Diebold has with the products that we've purchased from them — that it would just be a cost-expense center versus what I'm trying to [do], which is to use technology to have a competitive advantage. So no, I would not change the decision."

Download the free webinar "Financial Services Outsourcing: Five Steps to a Successful Partnership."

For more on this topic, visit the outsourcing research center.

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