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  1. 1. Outsourcing Opportunity: Strategic & Operational Level Mr.Shailesh Haribhakti Managing Partner & CEO Haribhakti Group
  2. 2. What is Outsourcing <ul><li>Bank's use of a third party to perform activities on a continuing basis that would normally be undertaken by the bank itself, now or in the future. </li></ul><ul><li>Specific feature of outsourcing is that the direct control of these operations is shifted to an external service provider. </li></ul>External Service Provider Intra-group Company Independent third party JV with Independent third party
  3. 3. Emergence of Outsourcing Industry in India Phase II 2000’s Phase I 1996-2000 Pioneers & Size Driven Factors Increasing adopters & strategy factors Phase III 2003 - 2008 Bandwagon & Competition Factors Captive BPOs: American Express, GE Capital, British Airways AXA, Ford, HSBC, Citibank Accenture, EDS, Bank of America
  4. 4. Banks are under increasing pressure today…. Pressures on Banks Evolving socio-economic & political context (WTO etc) Changing consumer concerns and buying behaviour Increasing convergence Shifting Regulations (RBS, BASEL II) Broadening distribution patterns Increasing customer expectations Changing basis of competition Shift to a global / international market Emerging technology
  5. 5. Types of Outsourcing in Banks Core activities Non-core activities Types of Outsourcing The whole business process- consisting of a set of activities is outsourced e.g. the entire management of customer accounts Outsourcing of processes Only parts- Individual activities of a whole process are outsourced e.g. printing of accounts statements Outsourcing of activities
  6. 6. Draft Guidelines by RBI dated 06.12.2005 Activities that should NOT be outsourced Management control Corporate Planning Management of investment portfolio Compliance with KYC norms for account opening Sanction for loans
  7. 7. Management Structure for outsourcing
  8. 8. Outsourcing Opportunities for Banks Higher service quality Greater efficiency Greater flexibility Focus on core competencies Lower Costs Opportunities Of Outsourcing
  9. 9. Evaluation of Risks Types of Risks Strategic Risk Reputation Risk Systemic Risk Operational Risk Compliance Risk <ul><ul><li>The service provider may conduct business on his own behalf, which is inconsistent with the overall strategic goals of the bank </li></ul></ul><ul><ul><li>Privacy, consumer and prudential laws not adequately complied with </li></ul></ul><ul><ul><li>Arising due to technology failure, fraud, error, inadequate financial capacity to fulfill obligations and/or provide remedies </li></ul></ul><ul><ul><li>Due to lack of control of individual banks over a service provider, more so when overall banking industry has considerable exposure to one service provider. </li></ul></ul><ul><ul><li>Poor service from the service provider, its customer interaction not being consistent with the overall standards of the bank </li></ul></ul>
  10. 10. The Whole Range Of Core Banking And Support Processes <ul><li>Sample processes </li></ul><ul><ul><li>Telesales </li></ul></ul><ul><ul><li>Customer service </li></ul></ul><ul><ul><li>Technical support help desk </li></ul></ul><ul><ul><li>E-mail support </li></ul></ul><ul><ul><li>Fax responses </li></ul></ul><ul><ul><li>Live interaction </li></ul></ul>Customer facing Voice Non-voice Inbound Outbound <ul><ul><li>Telemarketing </li></ul></ul><ul><ul><li>Collections (bucket one) </li></ul></ul>Business process off-shoring services <ul><ul><li>Benefits administration </li></ul></ul><ul><ul><li>Payroll processing </li></ul></ul><ul><ul><li>Retail banking (account maintenance, opening, check processing) </li></ul></ul><ul><ul><li>Fund administration </li></ul></ul><ul><ul><li>Reference data management </li></ul></ul><ul><ul><li>Claims processing </li></ul></ul><ul><ul><li>Database integration & analytical services </li></ul></ul><ul><ul><li>Secondary research </li></ul></ul><ul><ul><li>A/R and A/P management </li></ul></ul><ul><ul><li>Reconciliation </li></ul></ul>Back office Core business Support HR/ Admin Consumer banking Wholesale banking Insurance Research Finance & Acctg. <ul><li>Illustrative vendors </li></ul>
  11. 11. Key Initiatives <ul><li>Opportunities going forward </li></ul><ul><ul><li>Help desk support </li></ul></ul><ul><ul><li>Outsourcing of customer complaints </li></ul></ul><ul><ul><li>Credit card processing & printing </li></ul></ul><ul><ul><li>Cheque processing & clearing </li></ul></ul><ul><ul><li>Cheque box clearing & collection </li></ul></ul><ul><ul><li>ATM cash replenishment </li></ul></ul><ul><ul><li>Loan servicing </li></ul></ul><ul><ul><li>Pay-roll & pensions </li></ul></ul><ul><ul><li>Data processing of day-to-day clearing instruments like drafts and dividend warrants </li></ul></ul><ul><li>Current Activities Outsourced </li></ul><ul><ul><li>Hardware and software maintenance </li></ul></ul><ul><ul><li>Management of data centers </li></ul></ul><ul><ul><li>Outsourcing of data center operations </li></ul></ul><ul><ul><li>Disaster Recovery </li></ul></ul><ul><ul><li>Network management & monitoring </li></ul></ul><ul><ul><li>Maintenance of websites </li></ul></ul><ul><ul><li>Maintenance and management of links at ATMs </li></ul></ul>
  12. 12. Contact : Thank You Address: 42-43, Free Press House 215, Nariman Point, Mumbai – 400 021 URL: The Question is Not Whether to Outsource But What to Outsource Mr. Shailesh Haribhakti Managing Partner & CEO Haribhakti Group [email_address] Tel: +91-22-5630 8232 Fax: +91-22-2287 6249 E-mail: crg