IT & Business Process Outsourcing in FS

Business process outsourcing (BPO) - transaction processing, back-office operations and front-office outsourcing - is the outsourcing of whole business processes integral to the FSI's core business, rather than simply individual support functions. BPO consists of IT related spend, like infrastructure and application outsourcing, but also covers the cost of the ongoing operation (non-IT labor, premises, utilities, etc.). BPO has been deemed the hot-spot of financial services outsourcing and indeed financial services IT at large, but will fail to deliver on its potential if the business proposition is not made clearer. FSIs are currently largely in doubt about the business benefit of BPO, with many unwilling to even consider it. Thus, whereas Datamonitor believes that the scope for BPO services in European FS is virtually untapped, it is clear that in most niche markets vendor strategy and business benefits offered to the FSIs will have to be improved, as FSIs have branded them confusing and ill-defined, in order to tap into this market and continue the trend of reducing FSI reluctance to the concept.

In sum, however, the BPO segment will perform impressively over the next few years on current FSI attitudes to BPO alone, although this market potential can be grown significantly by improving the clarity of strategy and benefits as well as creating successful reference sites.

FSIs' outsourcing concerns

Recent Datamonitor research, see Datamonitor's IT Efficiency in Financial Services, revealed that while the majority of FSIs do in fact outsource some function or other, by far the majority rejects each individual type of outsourcing. This suggests that FSI take-up of outsourcing services will continue to be gradual, rejecting the hyperbole surrounding outsourcing and its take-up, and FSIs are seeking actual proof that the benefits promised can be delivered in terms of costs and reliability.