IT Outsourcing: A Comparison between the Romanian and the Dutch Banking Systems

By Elena, Ciolac Camelia; Silvius, A. J. Gilbert | Journal of International Technology and Information Management, April 2010 | Go to article overview

IT Outsourcing: A Comparison between the Romanian and the Dutch Banking Systems


Elena, Ciolac Camelia, Silvius, A. J. Gilbert, Journal of International Technology and Information Management


INTRODUCTION

The subject of IT outsourcing captured a special attention among researchers in time. Solli-Saether and Gottschalk (2010) realized a synthesis of the main contributions to the IT outsourcing theory and declare that "IT outsourcing- the practice of transferring IT assets, leases, staff and management responsibility for delivery of services from internal IT functions to third-party vendors- has become an undeniable trend". As knowledge and competitive advantage play a mediating role between firm extent of IT usage and its financial performance (Maiga & Jacobs, 2009), IT outsourcing can affect directly the IT knowledge and the competitive advantage of the banks and indirectly its overall performance. Here, an important aspect is defining which IT parts are strategic to a company in general, and to a bank in particular, and an answer is provided by Evans and Neu (2008) stating that "most core technology within an industry is tactical, rather than strategic" and that the Porter's Five Force model can be a valuable tool in identifying them.

This paper aims to identify the features of IT outsourcing in the Dutch and in the Romanian banking systems. We chose the two banking systems for comparison, as both of them have an oligopolistic structure (OECD, 2007; Gus & Hoarca, 2006), belong to countries members of the European Union (The Netherlands is one of the founding members, while Romania became member in 2007) and yet registered different dynamics over time. From this point of view, this research compares the approach to IT outsourcing in an evolving banking environment that emerged after 1990s (in Romania) and a more established one (in The Netherlands).

The features of IT outsourcing are reviewed and analyzed in literature considering the broader environment of the organization and the information usage within it (Fraihat, 2006; Wei & Peach, 2006). Both Dutch and Romanian literature from the last five years focused on this topic. While the Romanian studies focused on theoretical aspects, we could identify a more practical approach in articles written by Dutch researchers.

In the Dutch literature, dating from the last five years, some of the studies that debated IT outsourcing include are: Roe, Smeelen and Hoefeld (2005) that address the topic from an employee's perspective, Radkevitch, Van Heck and Koppius (2006) that analyze the opportunity of SMEs' access to offshore resources by means of online markets, Aydin and Bakker (2008) discuss the decision-making process from a knowledge-based perspective using decision primitives, Ponisio and Vruggink (2009) that underline the need for standards and modularization in monitoring outsourced software development projects.

In the Romanian literature from the last five years, this subject was reflected in studies such as: Mesnita and Dumitriu (2005) that present an overview of the IT outsourcing process components and discuss a SWOT analysis of the Romanian market, Boldea and Brandas (2007) that underlines the core concepts of this subject and debate the IT outsourcing theories, Brandas(2010) that shows the risks associated with IT outsourcing and explains the associated auditing process on both client- and supplier- sides.

With respect to these literature trends, this study is a practical approach to the field of IT outsourcing in the privileged field of banking, which is little represented from this point of view. This research extracts knowledge from press releases and interviews with IT managers coming from the banking industry, and is targeted on undergoing IT outsourcing contracts. This perspective assures a higher degree of accuracy in terms of actual practices. Therefore it is not intended to analyze the desired state of art, but the actual practices in the field of IT outsourcing in banks. As this research is committed to a synthetic overview of concepts, it focuses on the elements involved in an outsourcing contract and not on the banks themselves. The paper aims to identify the aspects considered of main importance in IT governance by the Dutch and by the Romanian Banks.

This study answers the following questions:

* which are the similarities and the differences between the Dutch and the Romanian banking systems with regard to their IT outsourcing strategy?

* what, why, when, how and to whom did banks from the Dutch and the Romanian banking systems outsourced in their IT operations?

THE DUTCH AND THE ROMANIAN BANKING INDUSTRIES OVERVIEW:

A LITERATURE OVERVIEW

The Dutch banking system is among the most consolidated banking systems in Europe. According to Boot (2007, 11-13), the banking market was shared in 2007 mainly between: ABN AMRO, Rabobank, ING, Fortis and SNS Bank, where ABN AMRO, Rabobank and ING had similar almost market shares. According to the same study, the SMEs banking segment is more heavily concentrated than the retail one. Later, Fortis Group focused on the insurance sector and the Fortis Bank was transferred to the ABN AMRO Group in April 2010 ("New governance at ABN AMRO Bank and Fortis Bank Nederland", 2010).

Boot (2007) argues in his study that concentration is not an inhibitor of competition and that different banking products are substitutes at different degrees, which empowers competition.

According to their websites, the following strategies can be identified in the Dutch banks:

* SNS Bank ("SNS REAAL Strategie", n.d.)- is limited to three product groups: mortgages and property finance (savings and investments) and insurance (life, injury, AOV and pensions). Target customers include: retail customers and SMEs. In terms of international presence, "virtually all income in 2008 was earned in the Netherlands" ("SNS REAAL Strategie", n.d.).

* ING Bank ("ING Group Mission and Strategy", 2010)--both banking and insurance operations. For the banking sector, "ING's long-term goal is to be a leading European retail and commercial bank" ("ING Group Mission and Strategy", 2010). From a historic perspective, ING was founded in 1991 by a merger between Nationale-Nederlanden and NMB Postbank Group. Its offer includes: banking, investments, life insurance and retirement services. In terms of international presence, the bank has subsidiaries participates in a number of financial institutions all over the world, including Asia's emerging markets.

* ABN AMRO Bank ("The future bank: ABN AMRO + Fortis Bank Nederland", 2010) --is at this moment wholly owned by the Dutch State, resulting from a 'bail-out' operation in the financial crisis of 2008, and operates in retail, private and commercial & merchant banking. From an international perspective, the bank has subsidiaries in 15 countries.

* Rabobank ("Rabobank Group Strategy", n.d.)--"grown from a collection of small, cooperative rural banks into the largest all-finance concern in the Netherlands" and aims to consolidate its position in the future: "dominant market position based in agribusiness, among private individuals and in small and medium-sized enterprises" ("Rabobank Group Strategy", n.d.). In terms of international presence, the bank has subsidiaries in 48 countries in April 2010.

From the mergers/acquisitions perspective, the Dutch banking system registered a lot of mergers in its way to consolidation.

At its turn, the Romanian banking system is still very crowded with universal banks. Once the transition to the market economy occurred, many foreign banks entered the Romanian financial market, either by acquisitions/mergers with local banks or by means of subsidiaries.

The mergers processes have affected different categories of banks differently: a) unprofitable banks were eliminated from the market by the competition around the year 2000.

b) the only bank owned entirely by the Romanian State preserved this form of ownership until present times.

c) banks having the Romanian State as a major shareholder changed their ownership and became privately-owned banks, with both Romanian and foreign capital subscription.

d) privately-owned banks with 100% Romanian participation changed their shareholders structure as foreign banks bought part of their shares.

Some of the biggest Romanian banks became members of international financial groups through mergers or acquisitions.

In this study banks from all categories (except a) were considered, in order to give a real perspective upon the real market situation. In terms of product offerings, most of the banks in Romania are universal banks, with retail, private and corporate divisions. Regarding the international presence, this is assured through membership in the international financial groups. Some Romanian banks managed to enter by themselves foreign financial markets and the Banca Transilvania is such an example, considering its subsidiary in Cyprus ("Banca Transilvania", n.d.).

With respect to the Romanian banks' strategy, the following aspects can be noticed:

* banks that joined an international banking group state as a strategy, in present years, the alignment to the group's standards and best practices, while increasing operational efficiency and profitability ("Strategia BCR", n.d.).

* all Romanian banks aim to extend the distribution network at a national level and therefore their declared strategies focus on branch extension in regions with a high growth potential.

* some Romanian banks aim to take advantage of the Romanian Integration in the European Union and included in their strategy the participation as a co-founder in European projects.

RESEARCH METHODOLOGY

In order to gather accurate data about the outsourcing contracts of the analyzed banks, a web-content mining has been carried out. Data was gathered from the press releases published on the banks' websites, from banks' reports to shareholders, from IT providers' case studies/reference stories and from IT specialized journals. The complete list of analyzed documents can be provided upon request.

In order to manage the documents effectively and to perform the qualitative analysis, we used the QDA Miner software version 3.2.3. Each document has been stored in a structure s with the following fields:

s = (bank, publication_year, document_body, document_picture, webjink). If the press release contained pictures / diagrams relevant to the analyzed subject, they were stored in the document_picture field of structure s described above.

In case a press release contained more than one relevant diagram the following convention was employed: each picture/diagram Pi got stored in a separate structure s=(bank, publication_year, null, document_picture, web_link), along with the bank's name, publication year and web link, while the document body got stored only once in a separate structure s0=(bank, publication_year, document_body, null, web_link).

The data gathered and stored in structures of documents was accurately analyzed and codified. This process resulted in a catalogue of codes, structured according to the five questions what, why, when, how and to whom the banks outsourced their IT services. A shared catalogue of codes has been used for the analysis of both banking systems, the Dutch and the Romanian one, in order to assure comparability among them.

A total of 135 codes have been used in order to code the paragraphs of text describing elements considered by banks in their IT outsourcing strategy. After completing the coding process for both classes of documents, corresponding to the two banking systems, we employed text mining techniques in order to extract knowledge from the texts. The following paragraphs describe the analysis carried out by us.

Coding Frequency

This analysis allows a computation of the numbers of appearances of each code within all the documents. By employing this technique, we can identify trends and patterns at the industry level, by aggregation of individual banks' approaches towards IT outsourcing. The codes with the highest representation among all documents considered for a banking system are likely to be the best candidates for defining the IT outsourcing patterns of that industry.

Coding Co-occurrence

This method allows a clustering of concepts according to their proximity in texts. The algorithm employed is the hierarchical clustering with average-linkage. The measure used in the clustering algorithm of codes is the number of documents they appear together in. For two codes, c1 and c2, the Jaccard coefficient of similarity is given by the formula:

Jaccard(d1,d2)= N1/N1+N2+N3

where

N1 = number of documents with c1 and c2

N2 = number of documents with only c1 (1)

N3 = number of documents with only c2

It is important to underline that the bigger value the Jaccard distance, the closer are the two codes cl and c2.

Using the same method allows us also to identify similarities among banks' approach to IT outsourcing within the same country. In this case the metric used in the clustering algorithm is either the number of codes that appear in each press-release or their associated frequency. For two documents, dl and d2, the occurrences of each code is stored in a vector. The similarity between these two documents is given by the value of a specific measure: the cosine theta. Its formula is, by definition:

[MATHEMATICAL EXPRESSION NOT REPRODUCIBLE IN ASCII] (2)

By using coding co-occurrence we are able to identify the concepts that often come together in reasoning for the IT outsourcing decision and to what extent banks from the same banking system agree on them.

Coding By Variable

This method allows a grouping of codes according to a variable that describes the document. For the analysis we shall use as a grouping variable, the year of the press release. In this manner, we can observe an evolution in the usage of concepts related to IT outsourcing over the years in the two banking systems that we analyze, the Romanian and the Dutch banking systems.

IT GOVERNANCE MODELS IN THE DUTCH AND IN THE ROMANIAN BANKING INDUSTRIES--A COMPARISON BASED ON TEXT-MINING

Dynamics of IT Outsourcing in the Two Banking Industries

A frequency diagram reveals from this early point in our research the dynamics of the IT outsourcing issue in the banking industries from the two analyzed countries.

In the Dutch banking system, the year 2001 represented the starting of the restructuring of IT infrastructure. Most of the press releases of that time debate the outsourcing opportunity along with the IT consolidation and rationalization methods. Most of the banking reports dating from 2001 are focused on answering the questions "why" and "how" to outsource.

The years 2004-2006 represented the peak for IT outsourcing contracts in the Dutch banking system and this comes reflected in the number of press releases dating from that period.

[FIGURE 1 OMITTED]

As shown in figure 1, in the Romanian banking industry, the IT outsourcing issue was brought into discussion after 2002. At first it was aimed at answering the "what" and "why" question. The peak of IT outsourcing contracts, as resulted from press releases was in the years 2006-2008. This brings an average of two years delay, when compared to the Dutch banking system.

IT Governance Organization

It is a commonly shared opinion among Dutch and Romanian banks that ICT is a key factor for the entire banking activity. In this section we illustrate the main principles employed by banks' IT managers when describing their IT strategy.

As shown in figure 2, the most frequent term employed by Dutch banks' IT representatives when referring IT role for the bank is the "competitive advantage". Several variations of the term could be identified in the analyzed documents: "competitive position," "competitive edge." Thus, it is considered that IT investments allow banks to enter new markets and increase revenues.

All decisions regarding IT are considered "strategic" for the bank in the Netherlands and often, IT governance is considered a part of the bank's overall business strategy. This idea is supported by the following quotes from the analyzed documents: "IT is an integral part of our strategy"(Rip Op den Brouw, n.d.), "the role of technology is strategic" (Rip Op den Brouw, n.d.), "IT governance structures integrate with the overall governance model" (Kan, 2004) and "IT governance is a subset, a very important subset, of governance as a whole" (Kan, 2004).

The strategic importance of IT for the bank is explained by the Dutch banks' IT management from the operational point of view: the bank "is totally dependent on information technology, not just to support and enhance its business, but increasingly to enable it. Today's global financial markets have IT as their lifeblood. Without IT, there would be no business" (Kan, 2004).

Furthermore, Dutch banks' representatives perceive IT as a promoter of new distribution channels: "a bank is based on IT, which encompasses all areas of the bank from its core operations and new distribution channels to customer relationship management offerings" (Rip Op den Brouw, n.d.).

Being a key area for the Dutch banks, IT is closely aligned to their business needs.

In terms of technology maturity, the Dutch banks carried out large projects of replacing legacy banking IT systems with modern technologies. According to Dutch banks representatives, when introducing new technologies, banks "are not risk-averse, but they strongly prefer to take a calculated risk". To support this statement, we can argue that the Dutch bank Rabobank was: one of the first European banks to implement a service-oriented mobile banking service (Rip Op den Brouw, n.d.).

In terms of IT governance organization, the Dutch banks prefer the use of global shared services and regional processing hubs. The IT management is generally formed by a board of decision makers, with respect to geographic fair representation, that collaborate in the process of decision making.

As an illustration of this idea, table 1 contains the main IT governance structures that were identified in the cases of ING and of Rabobank.

Having a network of subsidiaries spread across multiple continents, Dutch banks often set a certain level of decentralization. Generally, commodity IT, such as networks and data-centers are shared at a continent-level hub and associated decisions are taken at a Group level. Operational IT issues, such as enterprise applications and hardware, are decided at a regional hub level. Differentiating IT assets, such as business applications, have a decentralized decision process, at a business unit level.

In the Romanian banking system, according to a survey carried out by the National Bank of Romania in 2003, the most important sources of competitive advantage for Romanian banks in mid-term perspective were: the qualified personnel and the banks' management. The technology was considered in 2003 as "important" by 67% of respondents and as "of little importance" by 29% of respondents. Regarding the next 5 years, these percentages change significantly, so that the IT is perceived as "important" to the bank's competitive advantage by 87% of total respondents, as shown in figure 3.

[FIGURE 3 OMITTED]

The Romanian banks' management ("De vorba cu Calin Rangu, vicepresedintele CIO Council", 2007) consider that IT infrastructure is important as a support of business operations, but admit that of more importance are IT projects' management, the approach to the organizational change, the way IT services are delivered to end-users and the personnel's training.

Furthermore, representatives of Romanian banks consider that IT should become a partner of the business divisions. ICT's role is important to the bank as it "enables operations, creates value to the bank, provides the innovation that assures the bank's competitive position on the market and makes more difficult the imitation of bank's operations by other competitors"( "De vorba cu Calin Rangu, vicepresedintele CIO Council", 2007).

Generally, it is a shared opinion among Romanian banks' managers the fact that "IT is the foundation of all banking processes and plays a direct role in the value creation inside the organization" ("BCR Rapoarte Financiare -Raportul financiar 2003", 2004). As a conclusion, ICT is perceived more as a support to strategic operations rather than a strategic division itself, in the Romanian banks.

Approach to IT Outsourcing

Dutch banks' and Romanian banks' attitude towards outsourcing was different, as resulted from the text-mining analysis over the documents.

While both banking systems considered IT outsourcing as a strategic decision impacting their full operations, different aspects came into consideration when analyzing the opportunity of IT outsourcing. According to the press releases about Romanian banks, their management considered of prime importance the need to focus on core banking economic activities. Faced with a rapid change in technologies and associated skills requirements, Romanian banks' management perceived IT outsourcing as a way of fast access to cutting-edge IT assets.

Specialization is the key-word in Romanian banks' press releases on IT outsourcing: "to do what we know to do best"(Rangu, 2010), "the economic crisis brought the necessity to do something very well in order to resist. If a bank does banking, then the IT services should be provided by companies specialized in that" (Rangu, 2010).

There is little evidence in press releases of Romanian banks' fearing a loss in the competitive advantage due to outsourcing. On the contrary, the IT manager of an important bank claimed that "innovation itself is not a driver for growth. In fact, innovation never determined the differentiation, it just helped it" (Rangu, 2010). Still, the Romanian banks' management admits that outsourcing IT problems/ malfunctions will only lead to more problems (Rangu, 2009), therefore a mid-term strategy should be used.

The Dutch banking system was concerned with other aspects when analyzing the opportunity of IT outsourcing. Here we can observe an evolution in the terms employed in speeches over IT outsourcing. In the year 2004, prior to the big-bang in IT outsourcing in the Dutch banking system, fears referred mainly to the loss in competitive advantage due to the outsourcing decision. They claim that a cost-based analysis is not sufficient for the IT outsourcing decision: "Cost reduction is not a viable long-term strategy. Constantly focusing on cost reduction will eventually affect the quality of the products and services as well as the innovative strength of the institution, which would endanger its competitive position and continuity. Too much focus on cost reduction will lead to poorly motivated employees and a decreasing capability to benefit from new market opportunities when the economic climate improves." (Groeneveld & Wagemarkers, 2004).

From this perspective, we can conclude that Dutch banks carry out a deep opportunity analysis before outsourcing an IT service. This statement is supported by the declared will of Dutch banks to retain control over their IT operations. According to a Dutch bank representative: "Outsourcing is definitely not one of our main priorities. In fact, we only do it if there's no other option. We have a competitive edge if our business processes are well organized, which is why we'd really prefer to retain control over them." ("Why Rabobank opted for outsourcing", n.d.).

Being highly integrated in all workflows within Dutch banks, the management raises often the question of fragmentation and business cohesion when discussing the IT outsourcing option. By contrast to the Romanian banking system, in the Dutch one, costs are considered only as an argument to off-shoring: "The position of the cost curve may also differ between countries, which is the main driver behind the current trend of outsourcing ICT activities to low wage countries such as India." (Groeneveld & Wagemarkers, 2004).

Opinion Agreement within the Two Banking Systems

In order to assess whether opinions regarding IT outsourcing that were expressed through press releases were agreed at the industry level or they represented isolated points of view, we carry out a document similarity analysis based on the cosine measure (as explained in section "Research Methodology--Coding Co-occurence"). The resulting dendogram is represented in Figure 4.

[FIGURE 4 OMITTED]

In order to assess the degree of alignment of all documents to the same concepts within each banking system, a computation of distances between documents is carried out at each step and the two clusters with the smallest distance are joined. In terms of opinion agreement, the higher the percent of documents that are joined together at a higher similarity index, the more uniform are concepts of IT outsourcing among the financial industry in each country. From figure 5 we can observe that documents coming from the Dutch banking system have a slightly higher rate of convergence in terms of similarity than the documents coming from the Romanian banking system.

[FIGURE 5 OMITTED]

This trend can be explained through the number of banks considered for each banking system: three for the Netherlands and six from Romania. Still, all 100% documents are clustered at a distance between 0.5 and 0.4 for both banking systems (0.477 for the Netherlands and 0.472 for Romania).

IT OUTSOURCING STRATEGIES IN THE DUTCH AND IN THE ROMANIAN

BANKING INDUSTRIES

Based on the results of the text-mining algorithms described in section "Research Methodology" of this paper, we are able to point out some of the elements that characterize the IT outsourcing decisions in banks from the Dutch and from the Romanian banking systems.

Drivers for IT Outsourcing (Why)

In the process of IT restructuring and infrastructure consolidation, many banks from the Romanian and from the Dutch banking systems have identified outsourcing as a manner of supporting their IT strategy.

From Figure 6 we can observe as a similarity between the Romanian and the Dutch banking systems the fact that in the early stages of defining their IT outsourcing strategy, the main drivers they considered included: cost reduction, the possibility of a better focus on the core banking economic activities, a better control over IT assets and associated expenditures, as well as a way to mitigate risks associated with IT operations.

As time passed and banks from the two systems further analyzed the outsourcing process, the drivers for this decision got reoriented differently.

For the Dutch banks, the new drivers for IT outsourcing changed towards value creation through access to new technologies and skills, operation efficiency improvement, flexibility in terms of IT infrastructure and the capability of sustainable growth while improving operational quality.

[FIGURE 6 OMITTED]

Contrarily, for the Romanian banks the main drivers for IT outsourcing remained the cost reduction and the possibility to focus on core banking economic activities. In terms of benefits attended from this decision, the Romanian banks often invoked the increase in productivity, as well as the premise for development and redefinition of processes.

Still, banks from both banking systems identified the higher implementation speed and the quality improvement as drivers for IT outsourcing.

IT Suppliers Selection Criteria (To Whom)

Given the high value of IT for the operations of banks, as underlined in the previous section of this paper, a high importance is given by banks to selecting the right suppliers in the outsourcing process. As shown in figure 7, banks from the Romanian and from the Dutch banking systems addressed differently the issue of supplier selection, even if some common aspects exist.

[FIGURE 7 OMITTED]

The following similarities can be observed from this point of view. Banks from both systems prefer long-term partnerships with their suppliers and gradually enhance the extent of outsourcing with a supplier as the latter manages to cope successfully with the performance requirements of the customer bank.

Both in the Romanian and in the Dutch banking systems, bigger companies are preferred as outsourcers, given their higher expertise, financial stability and range of resources to support the banks' increasing operations. In the Dutch banking system there can be identified a slight differentiation between a High Competence Provider and a High Value Provider, depending on the bank's capabilities in the outsourced IT service, low or high.

The difference between the two banking systems is reflected in terms of number and relative location of suppliers. In the Dutch banking system, multi-sourcing IT contracts are not isolated cases. A relatively large number of analyzed documents contain references to multi-sourcing, collaboration with a consortium of IT companies that perform as a group. From a time perspective, the usages of the term "multi-sourcing" were spread over time as follows: 14.3% in 2001, 28.6% in 2005 and 57.1% in 2006.

In terms of location, the documents indicating a local (Dutch) IT provider and those indicating a foreign one had different apparition frequencies. While 5.6% of documents contain references to local Dutch outsourcers, 11.1% of the documents refer Indian IT outsourcers. We can conclude that off-shoring is a wide spread practice in IT outsourcing among Dutch banks.

In the Romanian banking system, we can identify a preference for uni-sourcer contracts, where the outsourcer is responsible and accountable for the whole operations of that IT service. Even if a multi-sourcing approach is employed, the Romanian banks prefer to establish a contract with one outsourcer that would manage all subcontractors.

The off-shoring alternative is not considered in the analyzed documents, as Romanian banks prefer the outsourcing relationships with local companies or local representatives of international IT providers.

Extent of IT Outsourcing (What)

In terms of IT services outsourced by banks in the two banking systems, we can observe in figure 8 a slightly different approach in the Dutch banking system compared to the Romanian one.

In the Dutch banking system, services related to communication, both internal (networks, e-mail) and external (call-center), were the first IT services to be considered for outsourcing between the years 2001-2008. An explanation to the fact that there is no evidence of ATM and POS maintenance outsourcing in Dutch banks in the period 2001-2008 might be the fact that these services were outsourced before that date.

The outsourcing of software applications' maintenance and development was carried out before the hardware infrastructure administration outsourcing in Dutch banks.

From the figure 8 we can conclude that 2005-2006 was the peak of activity in terms of IT outsourcing within Dutch banks.

In the Romanian banking system, the approach was different. The Romanian banks began the IT outsourcing process with ATM and POS maintenance, together with the printers' maintenance. The peak of activity in terms of IT outsourcing in the Romanian banks was registered during 2006-2007.

Compared to the Dutch approach to the extent of IT outsourcing we can conclude that the Romanian one is in an emergent state, as the main focus here is on infrastructure maintenance and helpdesk.

In terms of IT intangible assets, software maintenance outsourcing is better represented than the software development outsourcing. This is because Romanian banks prefer to retain project management in software development projects, even if a different company is in charge of writing the software application code.

[FIGURE 8 OMITTED]

A similitude between the Romanian and the Dutch banking systems refers to the approach towards payment system operations outsourcing. Both banking systems created a collaborative inter-bank association that acts as both user and shareholder of the payment infrastructure. Then, each bank in the system outsourced its payment operations to this new entity.

In the Romanian banking system, this approach is also visible in the field of cards processing, where a couple of banks formed an organization that owns and uses the specific infrastructure related to cards processing. All other banks in the system outsource these operations to this organization that has both expertise and resources to carry out the tasks.

The Time Dimension of IT Outsourcing Contracts (For How Long)

The IT outsourcing contracts carried out in the Dutch and in the Romanian banking systems have different time characteristics.

From this point of view, Dutch banks opt for longer period for IT outsourcing contracts, lasting for 5-to-7 years. On the contrary, the Romanian banks prefer IT outsourcing contracts over shorter periods of time. This fact indicates that there still exists in Romania the uncertainty specific for emerging markets.In terms of the moment when the IT services were outsourced by banks, in the Dutch banking system we could identify a big-bang approach where all the outsourcing contracts regarding parts of IT infrastructure were signed in one and a half years. Still, the Dutch banks characterize this approach as a "disciplined approach" (Scott-Barett, 2005), because it allows a better control over the whole IT outsourcing activity.

In Romania, the time of outsourcing depended on the banks' IT managers' trust in the local IT outsourcing market's maturity. Therefore, the approach was gradual, IT outsourcing contracts being planned as the market opportunity arose.

IT Outsourcing Relationship Management (How)

Once established the outsourcing relationship with the IT suppliers, banks from the Romanian and from the Dutch banking systems continued to supervise the performance of the outsourced IT services. The evaluation criteria used for outsourcing contracts assessment contained key performance indicators and standards compliance. Banks from both countries developed sets of metrics to evaluate the IT outsourcing contracts, as the costs alone did not provide enough information in terms of efficiency.

[FIGURE 9 OMITTED]

The IT management identified new skills required for successfully developing a partnership with the outsourcers. Among these skills, negotiation and continuous monitoring of key performance metrics are the most frequent. The IT department of the bank turns into a service integrator, as resulted from Romanian documents.

Based on Figure 9, we can observe that press releases regarding the Romanian banking industry have three main directions. The first one dates from the year 2005, when most of the terms underline the characteristics of an emerging market, where suppliers did not have the necessary IT infrastructure to support the operations of a bank and the management had difficulties in monitoring the undergoing IT outsourcing contracts.

The second direction can be identified in the Romanian press releases dating from 2007 when the banks extended their IT outsourcing processes. The bank managed this activity as a win-win situation, where benefits are mutual for both the bank and the IT supplier. The communication with the IT outsourcers was mainly focused on solving problems and feedback.

The third direction that can be noticed in press releases concerning the Romanian banking system is the lack in standards and in best practices in the management of IT outsourcing contracts. Some banks perceived as a social responsibility the dissemination of know-how gained in this field, so that through a best practices guide would be created through collaboration and knowledge sharing.

In contrast to these directions, in the Dutch banking system more advanced topics of supplier relationship management could be identified.

In the case of Dutch banks, the main two directions focused on the type of relationship developed with the IT outsourcer as well as on social responsibility issues. From the first perspective, we could identify a collaborative approach to the relationship bank-IT outsourcer, where responsibility is shared between the outsourcer(s) and the internal IT department of the bank. Based on standards and best practices, banks signed Memorandums of Understanding with the outsourcers where the responsibility is clearly divided between stakeholders. In terms of collaboration with off-shore companies, Dutch banks' representatives claim that "Cultural issues [between partners] are not really relevant beyond the ability to trust them, which is difficult to define, and have a lot of personal elements."("Case study Rabobank", n.d.).

The second perspective is related to Dutch banks' approach to social responsibility, which is mainly concerned with off-shoring issues. Therefore, codes related to developing countries, environment care and human rights are frequently used in conjunction with the code of social responsibility.

IT Outsourcing and the Organizational Change (How)

Both Dutch and Romanian banks' managers admit that IT outsourcing strongly affects the organization and that reengineering processes should be carried out within the bank.

The documents concerning the Romanian banking system focus on personnel reduction and the inercy to change within the organization. These press releases debate the advantages that IT outsourcing could bring to the remaining staff in terms of workflow optimization. The Romanian banks' management approach to personnel reduction is by re-qualification, reallocating people to other operational departments of the bank.

[FIGURE 10 OMITTED]

The Dutch banks have a different approach to this issue, as resulted from the text-mining analysis. Keywords of Dutch press releases are linked to the regulatory consent and Employees Council consent for the IT outsourcing decision. Therefore, the Dutch banks' management is more concerned about elaborating social plans that would ensure personnel job security and a minimum impact on staff morale , as shown in Figure 10.

In terms of personnel reallocation, the most frequently used strategy within Dutch banks consists of personnel transfer to the IT outsourcer, while guaranteeing job security at the new employer. Regarding the risks involved in the personnel transfer to the outsourcer, Dutch banks' management considers that "staff need to be able to identify with their employer"("Why Rabobank opted for outsourcing", n.d.) and admit that "being transferred to a new employer is a painful process" ("Why Rabobank opted for outsourcing", n.d.) , which is why the inercy to change is higher in the early stages of the IT outsourcing process.

Depending on the size of the IT outsourcing contract, the number of employees transferred to the IT outsourcer varies from 150 to 2200, as resulted from the analyzed documents. According to a Dutch bank representative, the bank is " only satisfied if we have the feeling that 'our' people are still our people" ("Why Rabobank opted for outsourcing", n.d.) and therefore the main aspects in an IT outsourcing contract are the outsourcer's commitment and employment plan.

IT OUTSOURCING CONCEPTS' PROXIMITY

Based on the Figures 14 and 15 from the appendix, this section of the paper aims to identify how the concepts discussed in section "IT Outsourcing Strategies in the Dutch and in the Romanian Banking Industries" get inter-correlated in documents. Therefore, we discover the relationships between what, why, when, how and to whom the IT outsourcing process occurred in the Dutch and in the Romanian banking systems.

The approach to this analysis starts from a couple of what outsourcing items and gathers information about related concepts.

Contact Center Outsourcing

Common to both the Dutch and the Romanian banking systems, the contact center outsourcing had different contracts' focuses according to press releases, as show in figure 11.

First, the contact center outsourcing is discussed in press releases at certain distances from other outsourced IT elements (what). In the Romanian banking system, the contact center outsourcing decision is presented at 0.250 Jaccard distance from the Telemarketing/E-mail outsourcing decision, at 0.200 Jaccard distance from the Applications maintenance and at 0.143 Jaccard distance from the ATM/POS maintenance and cards processing outsourcing decisions, whereas in the Dutch banking system, the contact center outsourcing decision can be found at a 1.000 Jaccard distance from the Telemarketing/E-mail outsourcing decision, at 0.500 Jacacrd distance from the Network/Telecom and IT helpdesk outsourcing subjects and at 0.333 Jaccard distance from Hardware administration outsourcing decisions.

[FIGURE 11 OMITTED]

In terms of drivers (why) for the contact center outsourcing decision, the following proximities were registered, measured in Jaccard distances: 0.429 from Resource savings, 0.333 from Quality Improvement, 0.222 from Costs, 0.200 from Productivity Increase and 0.143 from Implementation Speed in the Romanian banks, compared to the distances of 0.250 from Flexibility, 0.125 from Savings and 0.111 from Costs in the Dutch banks.

For the features of the IT suppliers (to whom), in the press releases related to Romanian banks this aspect is not detailed as they are all uni-sourcer contracts, while in the Dutch banking system, the contact center outsourcing decision has the following proximities computed on Jaccard distances: 1.000 from Perform As A Group and Consortium of Companies where the outsourcers a treated as a whole, 0.250 from Indian Providers and Multisourcing.

In terms of how the contact center outsourcing decision was perceived to affect the bank, in the Romanian banking system, the following Jaccard distances were registered: 0.200 from Standards Compliance and 0.125 from High Quality operations. In the Dutch banking system, the contact center outsourcing decision is at 0.250 Jaccard distance from personnel reduction and at 0.111 Jaccard distance from Personnel Transfer to Outsourcer.

Networks / Telecommunications Outsourcing

In the networks and telecommunications outsourcing, there can be identified similarities and differences between the Dutch and the Romanian banking systems.

In terms of similarities, we can observe from figure 12 that the network/telecom outsourcing decision is close in terms of Jaccard distance to other IT services outsourced by banks (what): Hardware administration (at a Jaccard distance of 0.500 in Romanian banks and 0.667 in Dutch banks) and Printers Maintenance (at a Jaccard distance of 0.250 in Romanian banks and 0.500 in Dutch banks). A specific feature can be noticed in documents regarding the Dutch banking system, where the networks/telecommunications outsourcing is discussed in tandem with the IT Helpdesk outsourcing, at a Jaccard distance of 1.000.

The differences between the Romanian banks' approach to networks/ telecommunications outsourcing and the Dutch one appear when considering the motivation of this decision (why). For the Romanian banks, the issues regarding the networks outsourcing are found at a Jaccard distance of 0.200 from the need to Focus on Banking Activities and at 0.125 Jaccard distance from the Costs reduction driver. In the Dutch banking system, the main drivers for this decision are the following, based on their Jaccard distances: Savings (0.250), Costs (0.222), flexibility (0.200) and Quality Improvement (0.200).

[FIGURE 12 OMITTED]

In terms of duration (for how long), the Romanian banks opted for 3-year contracts of networks/ telecom outsourcing, while the Dutch ones preferred longer-term contracts that last between 5 and 7 years.

Similar to the case of Contact center outsourcing, once again in the networks/telecom outsourcing decision, press releases regarding the Romanian banking sector do not provide details about the type of outsourcing employed, as all of these contracts are known to be unisourcer. In the Dutch banking system, the following distances between the network/ telecom outsourcing code and codes regarding the IT suppliers (to whom) were registered: Multisourcing (0.500), Consortium Of Companies (0.500), Indian Providers (0.200).

In terms of how the networks/ telecom outsourcing contracts were carried out, in the Romanian banks, this decision is close at a Jaccard distance of 0.500 to the Gradual feature, while in the Dutch banks the codes found in its proximity, based on the Jaccard distance are: the Common Penalties and Incentives given to the group of outsourcers (0.500), the Personnel Transfer to the outsourcers (0.222) and the Personnel Reduction (0.200).

Software Development Outsourcing

From the analysis, we discovered a relatively high proximity between software development outsourcing and applications maintenance: a 0.571 Jaccard distance in the Dutch banking system, compared to 0.500 Jaccard distance in the Romanian banking system.

In terms of drivers (why) for the software development outsourcing decision, in the press releases regarding Romanian banks, issues such as Implementation Speed (at a 0.250 Jaccard distance) and Resource savings( at a 0.167 Jaccard distance) were found in its proximity.

In the documents regarding the Dutch banks, the software development outsourcing decision is close in terms of Jaccard distance to drivers such as: its capability to Create Value (0.500), to assure Quality Improvement (0.333), to Support Growth (0.250), to give acces to Cutting Edge Technologies (0.250), to Improve Performance (0.250) and to increase Operational Efficiency (0.222). The financial-related drivers come last as proximity to this IT outsourcing decision: Savings (at 0.200 Jaccard distance) and Costs (at 0.182 Jaccard distance).

With regard to the IT supplier (to whom) selection for software development outsourcing, the press releases concerning the Dutch banks register the following proximities, in terms of Jaccard distances: Big Companies (0.500), Dutch Provider (0.200) and Multisourcing (0.143). The Romanian analyzed documents lack in this sort of information, as all outsourcing contracts in the Romanian banking system are uni-sourcer, so this data is implicit.

[FIGURE 13 OMITTED]

Regarding the approach (how) to the management of the software development outsourcing contracts, as represented in figure 13, we identify the approach used in each banking system.

In documents concerning the Romanian banks, the software development outsourcing decision is close, in terms of Jaccard distance, to concepts like: Workflow Optimization (0.333) and High Quality (0.200).

A more agglomerated proximity is registered in the press releases about the Dutch banking system, where the following terms describing their approach to the organizational change were registered: the need for Regulatory Consent (0.500), the Disciplined Approach (0.250), Selective (0.250), Employees Council Consultations (0.222), along with Personnel Transfer to the Outsourcer (0.182).

Based on the analyzed data and the computed Jaccard distances, we observed that the Romanian press releases regarding the IT outsourcing within banks focused more on the object (what) and the reason for their decision (why). Contrary, the Dutch banks focused more, in their press releases, on the features of their IT suppliers (to whom) and the manner in which the outsourcing relationship and organizational change occurred (how).

CONCLUSIONS

This study managed to underline the similarities and the differences between the Romanian and the Dutch banks in terms of IT outsourcing strategy. While the Dutch banks employed a bigbang approach to IT services outsourcing, in which a major part of IT commodity was outsourced to consortiums of IT suppliers in a multisourcing and often offshore manner, the Romanian banks preferred a gradual approach to this issue, where IT commodities were outsourced to local IT providers or local representatives of international IT companies, mostly in a uni-sourcing near-shore manner.

Generally, IT outsourcing contracts are shorter in Romania lasting for an average of 3 years, when compared to the Dutch ones that have durations of 5-7 years. All these differences can be explained by a certain degree of uncertainty and mistrust of the Romanian management in the capabilities and in the maturity of the local IT outsourcing market in the early 2000s. This situation changed gradually as the Romanian banks began the practice of IT outsourcing and began to gain confidence in this process.

On the contrary, the Dutch banks carried out a comprehensive analysis at all IT and business levels and incorporated the IT outsourcing practices in the overall strategy of transformation and rationalization of this division within the bank.

Therefore, for the Dutch banks, the IT outsourcing was a phase inside a broader strategy of IT/business alignment, while for Romanian banks the IT outsourcing was driven by the financial context.

APPENDIX

[FIGURE 14 OMITTED]

[FIGURE 15 OMITTED]

ACKNOWLEDGEMENT

For Ciolac Camelia Elena, this article is a result of the project POSDRU/6/1.5/S/11, Doctoral Program and Ph.D. Students in the education research and innovation triangle." This project is co funded by European Social Fund through The Sectorial Operational Programme for Human Resources Development 2007-2013, coordinated by The Bucharest Academy of Economic Studies.

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Ciolac Camelia Elena

The Bucharest Academy of Economic Studies

ROMANIA

A. J. Gilbert Silvius

Utrecht University of Applied Sciences

THE NETHERLANDS

Table 1: IT governance organization within major Dutch bank groups.

ING Group (Source: Kan, 2004)

IT policy board:
--  OPS/IT  portfolio  keepers  of the three
executive  centers  (Europe,  Americas and
Asia/Pacific)

-- director of the Corporate IT (CIT) staff
department

IT leadership council:

-- business CIOs who advise the policy board

-- IT standards committee

-- IT architecture committee

-- strategic infrastructure committee

Information Security Steering Committee

Rabobank Group (Source: "Case study
Rabobank", n.d.)

--  the  group  had  152  independent local
Rabobanks plus the central organization of
Rabobank Nederlands, and several subsidiaries
in 2009 => the decision-making has to be
extremely cooperative and complex

Rabobank Parliament:

--lack of hierarchy

--within the Bank, central management
explains and justifies decisions to the local
banks at meetings known as 'central circle
meetings'

-- this central team that assures knowledge
transfer between local banks and sharing of
best practices

Figure 2: Terms related to IT governance strategy and their
frequency in the Dutch banking system.

code                              code frequency

CompetitiveAdvantage                     11.1
Strategic                                 5.6
RelevanceToBusiness                       5.6
Reengineer                                5.6
NotRiskAdverse                            2.8
NoBusinessWithoutIT                       2.8
Lifeblood                                 2.8
KeyFocusArea                              2.8
KeepButReplaceLegacyInhouse               2.8
InvestToRemainCompetitive                 2.8
GovernItAsInvestmentPortfolio             2.8
AlignmentITWithBusiness                   2.8

Note: Table made from bar graph.

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