SCB turns to outsourcing

Although banks claim that shared services, or outsourcing/insourcing, is a way of streamlining operations and reducing costs, this is not always the case.

With financial services institutions constantly on the hunt for ways to reduce costs and streamline operations, they are increasingly turning to outsourcing and/or insourcing, or its collective term, ‘shared services’.

"Banks and mergers and acquisitions activity has driven a lot of our sourcing activity," Ravi Kumaraswami, managing director, Asia Pacific for Ariba, said. The road to shared services success, however, is filled with potholes.

Deloitte Consulting found that nearly two thirds of companies are bringing outsourced core services back in-house than going the other way.

One example is Standard Chartered Bank (StanChart). After outsourcing three business lines, the bank ended up tripling its costs because of the lack of visibility across the projects, but refused to mention any other details.

StanChart ended up insourcing its operations in Chennai, India; the bank also has shared services centers (SSCs) in China, Ghana, Kenya and Malaysia.

The challenge is to maintain the productivity of the SSC under conditions like acquisitions, such as the bank’s takeover of Korea First Bank in 2005. Although shared services is supposed to lower headcount, hence costs, 11 percent of StanChart’s global employee count is concentrated in Chennai. But Surya Subramaniam, head of finance systems and service delivery at StanChart retorts, "We view the people as what we get out of this, not as the amount of bodies." – The Asian Banker