The UK Independent Banking Commission’s Interim Report – and Outsourcing

Noel Cullen, Principal Advisor, KPMG in the UK

The recently published UK Independent Banking Commission’s (IBC) interim report has recommended that major banks separate their retail operations from higher-risk activities. Were such a requirement introduced, changes on this scale would have a significant impact on banks’ IT strategies.

Change of this nature would almost certainly lead to dramatic changes to existing sourcing deals and delivery models, particularly for IT outsourcing and application management resources.  The change is likely to be less dramatic for knowledge process outsourcing or business process outsourcing, where services are more sector specific.

This shift would also have a cost and complexity impact for the delivery of services: where an existing model fragments, this will affect the processes on both sides of the split while the commercial aspects of any spending and savings commitments may lead to an increase in costs. More progressive thinkers may use this as an opportunity to rationalise and simplify their sourcing arrangements.

The changes should be viewed as an opportunity – many organisations have some legacy sourcing agreements which may be no longer optimised and offer neither best value for money nor cutting edge services.  In similar situations, many organisations have been reluctant to tackle these legacy deals because of the organisational and legal costs involved. However, a paradigm shift like this allows organisations to re-evaluate their deals and drive better cost and service levels.

In summary – yes there will be changes and these will be costly for some, but shrewder outsourcing customers will view this as a real opportunity to enhance the cost and service level efficiency from their service provider relationships.

For further information on this new story, see this Computer Weekly article.

And for more on outsourcing in the financial sector in Europe, read EquaTerra’s report, IT Outsourcing Trends and Satisfaction Levels in the Financial Services (FS) Industry across Western Europe.

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