| Summary: | Outsourcing has gained precedence as an important strategic tool for management. Especially in banking, where banks have been outsourcing their IT operations for the past two decades, the concept of outsourcing entire business processes to third party service
providers has been growing in popularity over the years.
Outsourcing offers a wide range of solutions like improved quality, streamlining of processes and cost reduction of a wide variety of business processes within banks. For example, large banks can avoid the complications of integrating legacy systems and small banks can avoid investing in IT almost entirely. The emergence of outsourcing service providers, who can handle a wide array of processes like cheque processing, imaging, data management, and call centres much more cost effectively has sparked off an outsourcing revolution among banks.
There are risks associated with outsourcing as well, such as loss of skills and capabilities,increased transaction and monitoring costs, the service provider may not perform up to the desired standard and other related risks. But these are risks that can be managed with
proper communication and timely reviews of performance between the outsourcer and the service provider.
For a bank, the key to a successful outsourcing relationship is being clear about its goals before it embarks on the outsourcing journey and also make it clear to its service providers what it expects of them. The future of outsourcing in the banking industry is bright with more and more banks adopting the Build Operate Transfer model of outsourcing.
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