Research & Thoughts

Strategic Sourcing – A Journey to Where?

The strategic sourcing journey – before embarking, the desired destination must be defined with total clarity

It used to be that all sourcing routes led to cost reduction. Now, however, the ITO and BPO markets offer new locations, innovative delivery models, increased vendor choice and enhanced service propositions. The benefits of a ‘joined up’ sourcing strategy are much wider ranging and potentially very impressive. But, before selecting partners and embarking on the sourcing journey, the desired outcomes must be articulated and agreed. For strategic sourcing to deliver transformational value, it is not enough to travel in hope. The destination needs, at all times, to shape the journey. Start with the end very much in mind.

Source to survive – but don’t forget the customer

Major issues force banks to scrutinize existing delivery models. Cost and pricing pressures grow. At the same time – post the most acute phase of crisis – customers demand higher service levels, through a reliable and personal banking experience. Every sourcing decision should balance the dynamics of cost control and reduction with maintaining or improving service quality. When ‘cost is king’ - to the detriment of customer experience and loyalty – there is a correspondingly high risk of brand damage and market share erosion. In responding to industry pressures, the voice of the customer must continue to be heard.

ITO and BPO sourcing – from ‘mess for less’ to transformation enabler
The ITO and BPO markets are now highly mature.

Yes, the traditional benefits of wage arbitrage remain (for the time being at least). Now though, additional attractions include availability of high-end financial services (FS) skilled individuals, risk diversification, process optimization and improved service levels to enhance customer experience. As a result, sourcing sits on the transformation agenda.

The growth of sourcing, both in prevalence and prominence, is matched by an increase in the numbers of vendors – global and niche. New near-shore and offshore locations have emerged in Europe, North Africa and Latin America. Progressively broader vendor propositions (bundling of BPO with IT and process optimization) focus firmly on driving business value.

Simultaneously, wider technology innovation has the potential to ‘industrialize’ IT service delivery – thus increasing automation, scalability and reliability. Growing interest in cloud computing compels organizations to consider the best use of this disruptive technology and the potential move it offers to a more agile, on-demand delivery model.

Run for less today, change more for tomorrow
There is now a dual challenge (and inherent opportunity). First, leverage low cost IT services across ‘run the bank’ functions. Second, target increased IT and business spend on value-adding growth and ‘change the bank’ transformation initiatives.


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