The Financial Services Outsourcing Outlook: Fast growth markets, opportunities and competitive strategies

Increasingly financial services institutions are overcoming their traditional reluctance to yield control and are now outsourcing a wide range of ICT infra-structure, application and business process services in pursuit of operational efficiency and reduced costs.

‘The Financial Services Outsourcing Outlook: Fast growth markets, opportunities and competitive strategies’ is a new management report that highlights the outsourcing opportunities for technology vendors within financial services institutions throughout the Europe and North America, from business process outsourcing to offshore outsourcing.
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The Financial Services Outsourcing Outlook
Executive Summary
Introduction
Financial services outsourcing market analysis
Business process outsourcing in financial services
BPO focus: US insurers
FS customer relationship outsourcing: Europe
FS customer relationship outsourcing: North America
Infrastructure and application outsourcing in financial services
Offshore outsourcing in financial services

Chapter 1 An introduction to financial services outsourcing

Summary
Overview
Definitions
Outsourcing
Application outsourcing
Business process outsourcing (BPO)
Business transformation
Business transformation outsourcing (BTO)
Infrastructure outsourcing
Nearshore outsourcing
Offshore outsourcing
Benefits achieved through outsourcing
Barriers to outsourcing
Market overview
BPO
Customer relationship services/call centres
Infrastructure outsourcing
Offshore

Chapter 2 Financial services outsourcing market analysis

Summary
Market drivers
Prospects for FSIs
Market analysis by geography
Europe
North America
Market analysis by outsourcing sector
Call center/customer relationship outsourcing
Infrastructure
Application outsourcing
BPO
BTO
Offshore
Front office vs back office

Chapter 3 Business process outsourcing in financial services

Summary
Market overview
Propensity to outsource
BPO market opportunities
Country breakdown of European BPO opportunities
Leaders
Growers
Laggers
BTO or BPO?
BPO and BTO defined
BTO vs BPO – which will be the dominant strategy?
Challenges for BPO providers
Perceived risk
Corporate governance
Vendor profitability

Chapter 4 BPO focus: US insurers

Summary
Market overview
Horizontal BPO vs vertical BPO
Strategy drivers of BPO
Business and technology drivers for BPO
Business and technology inhibitors against BPO
Dependency
Perception of risk
Reluctance to outsource core business functions
Leakage
Intellectual property
Predicting costs
Overhype
Segregation from other customers’ outsourced businesses
Three potential models for BPO
End-to-end BPO
Sub-process BPO
Process-agnostic, functional BPO
BPO opportunities in US insurance
Overview
The claims management process
The policy administration process
Open versus closed books of business for life insurers
Onshore vs offshore delivery

Chapter 5 FS customer relationship outsourcing: Europe

Summary
Market trends
Call center outsourcers
Financial services call center outsourcing
Market overview
Expanding service portfolios
New services
Telephony services
Human resources (HR)
CRM applications
Fulfillment
Implications of expanding service portfolios
Evolving pricing models
Traditional pricing models
Flaws in traditional pricing models
Risk / reward sharing
Risk / reward sharing in a service environment
Pricing risk / reward sharing agreements
Efficiency sharing pricing models
Action points

Chapter 6 FS customer relationship outsourcing: North America

Summary
Overview
Customer relationship outsourcing in financial services
Inhibitors to growth
Reasons to outsource
Cost containment
Access to outsourcers’ experience and expertise
External delegation of staffing responsibilities
Concentration on core competency
Access to Spanish-speaking agents
Expanded portfolios
Full outsourcing
Insourcing
Set-up insourcing
Long-term insourcing
Co-sourcing
Value-add services
Transitioning from outbound to inbound services
Conclusion

Chapter 7 Infrastructure and application outsourcing in financial services

Summary
Infrastructure outsourcing: Europe
Strategic drivers of infrastructure spend
Infrastructure outsourcing: North America
Market overview
Desktop
Network
Data center
Comparison with European infrastructure outsourcing
Opportunity identification
Line of business variations
Conclusion

Chapter 8 Offshore outsourcing in financial services

Summary
The evolution of offshore and nearshore outsourcing
Offshore and nearshore locations
Dutch-speaking markets
English-speaking markets
French-speaking markets
German-speaking markets
Italian-speaking markets
Spanish-speaking markets
Locating within the EU
Implications of offshore and nearshore outsourcing
Barriers to offshore and nearshore outsourcing
Market drivers
Propensity to outsource in European FSIs
Market sizing and opportunities
Action points
Conclusion
Index
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Table 3.1: BPO in European FSIs by sub-segment and line of business to 2005 54
Table 3.2: Country breakdown of European BPO opportunities to 2005 59
Table 4.3: US insurance vertical BPO spend to 2006 73
Table 5.4: Financial services agent positions EMEA 2002 & 2007 97
Table 5.5: Services offered by call center outsourcers 99
Table 6.6: US Hispanic population 1990, 2000, 2003 117
Table 7.7: Infrastructure outsourcing growth by opportunity segment in North American financial services 2003-2006 137
Table 7.8: Infrastructure outsourcing spend growth by line of business and infrastructure service 2003-2006 139
Table 8.9: Main offshore and nearshore outsourcing locations for the major EMEA markets 147
Table 8.10: European financial services offshore outsourcing spend, 2003-2005 159

Figure 1.1: Which expectation has been met by outsourcing services provider? 27
Figure 2.2: What are the primary drivers of IT strategy? 36
Figure 2.3: Outsourcing market growth to 2005 39
Figure 2.4: Retail banking IT spend in the US 40
Figure 2.5: Financial services agents positions 2002-2007 42
Figure 2.6: Application outsourcing in European FSIs 46
Figure 3.7: Prospects for banking BPO services 56
Figure 3.8: Prospects for insurance BPO services 57
Figure 3.9: Key BPO opportunities 58
Figure 3.10: European FSI skepticism of BPO 64
Figure 4.11: US insurance vertical BPO spend to 2006 73
Figure 4.12: The claims management process of a P&C insurer 84
Figure 4.13: The policy administration process of a life insurer 85
Figure 5.14: In-house and outsourced agent positions in EMEA 2002-2007 92
Figure 5.15: Value of the EMEA call center market 2002-2007 93
Figure 5.16: Outsourced agent positions in EMEA by vertical 2002-2007 95
Figure 5.17: Financial services agent positions 2002 & 2007 96
Figure 5.18: The applications structure of an enterprise 98
Figure 6.19: US customer relationship outsourcing market 2002-2008 111
Figure 6.20: Vertical market segmentation of outsourced APs 2003 112
Figure 6.21: Proportion of outsourced APs by vertical against US average 2003 113
Figure 6.22: Value of outsourced services 121
Figure 7.23: Infrastructure outsourcing propensity 125
Figure 7.24: Infrastructure outsourcing plans of banks and insurers 127
Figure 7.25: Primary issues being addressed in FSI’s IT infrastructure 128
Figure 7.26: Which areas of infrastructure spend will be under most cost pressure in the next two years? 129
Figure 7.27: What are your key strategies /tactics to reduce long term infrastructure costs? 130
Figure 7.28: Does outsourcing play a role in achieving infrastructure cost cutting objectives? 131
Figure 7.29: US infrastructure outsourcing spending developments 2002-2006 132
Figure 7.30: Comparison between US and European infrastructure outsourcing 135
Figure 7.31: Infrastructure outsourcing growth by opportunity segment in North American financial services 2003-2006 136
Figure 7.32: Line of business infrastructure outsourcing variations 138
Figure 8.33: Main barriers to offshore outsourcing 153
Figure 8.34: Levels of skepticism towards offshore outsourcing 157
Figure 8.35: Country variations in offshore outsourcing attitudes 158
Figure 8.36: Offshore outsourcing continues strong growth 160
Figure 8.37: New services provided on an offshore basis will drive greater spend 161
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