Magazine article American Banker

Where Banks Can Win with Outsourcing

Magazine article American Banker

Where Banks Can Win with Outsourcing

Article excerpt

Banks have turned to lay-offs, restructurings, even mergers to relieve the crushing costs of their workforces. But they are generally slow to implement outsourcing, a staffing option than can help them run leaner and more efficiently.

Their emphasis should go beyond lowering the manpower budget. Fixed costs, such as personnel, should also be converted into variable costs. Banks are already applying this strategy to leasing space or equipment, instead of buying.

When it comes to personnel, though, most banks have held to traditional staffing schemes. They are skittish about new staffing options.

One of the few banks committed to outsourcing is Continental Bank, with its $700 million contract with International Business Machines Corp. The contract is expected to save the bank 20% on its technology operations.

Flexible Staffing Need

As with other businesses, bank departments are not equally busy all 52 weeks of the year. One key objective of outsourcing is to maintain optimum staffing levels for peak business periods as well as slower time. The inherent flexibility of outsourcing makes this possible.

The insurance industry and banking have similar back-office structures. But insurance has made far more aggressive use of outsourcing. The list of companies from other industries that use outsourcing - some even as a survival strategy - is growing quickly.

Why should banks make outsourcing part of their staffing schemes? First, it would help shed "invisible" personnel costs such as recruiting and training.

Stripped Down for Action

Outsourcing allows banks to "strip down," to concentrate on what they do best. At the same time, they will avoid overhead costs associated with maintaining additional departments, personnel, and equipment.

In other industries, outsourcing companies have assumed "performance responsibility" for entire functional areas. …

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