Cost pressures and regulatory requirements will continue to challenge financial institutions’ and corporations’ ability to grow revenue, compelling them to look to trusted outsourcing providers for additional managed services, says SunGard.
This is particularly true in relation to back-office functions, as well as areas that do not contribute directly to revenues but were previously considered too risky to outsource, such as tax processing, actuarial modeling and retirement plan recordkeeping.
"The shift will help firms recognise cost savings from service providers’ economies of scale, domain expertise and quality integrity, while helping firms focus resources on core business areas that directly contribute to revenue generation,” notes Kalpesh Master, managing partner for managed services, SunGard’s global services business SunGard has identified ten trends in managed services and outsourcing for 2013:
1. As outsourcing matures, firms will look to their service providers as partners for a complete solution that bundles software with professional services, custom application development and managed services, as well as thought-leadership.
2. The Business Process-as-a-Service (BPaaS) model will gain momentum because firms can leverage a utility model that serves multiple companies, provides economies of scale and supports an efficient end-to-end business process.
3. Firms will continue to seek software solutions delivered on a Software-as-as-Service basis, so they can select software components in the cloud to create a single, customised solution.
4. Customers of Business Process Outsourcing (BPO) services will look beyond traditional application hosting and staff augmentation or replacement models to add domain-specific business services and thought leadership.
5. IT executives will outsource more IT infrastructure and application management services to help reduce total cost of ownership and free up internal resources.
6. Firms will look for outsourcing providers that can offer cloud computing to help more quickly prototype and develop applications.
7. Compliance with regulatory and operational risk requirements are leading firms to look more closely at the integrity of outsourcing service providers and to demand strong Service Level Agreements.
8. Firms are moving towards service contracts that are based on a variable cost model, which transfers risk to the service provider and helps firms save money and better manage the peaks and valleys of demand.
9. Adhering to best practices and global certifications and standards such as COPC, ITIL and Lean Six Sigma will help outsourcing providers offer customers more efficient and higher quality services.
10. Firms will look to managed services providers to operate and maintain new and complex initiatives such as big data and smart grids.
“The financial services industry is expected to increase its spending on outsourcing of services and technology at a rate more than two times that of traditional onsite IT spending through 2015," says Rodney Nelsestuen, CEB TowerGroup senior research director.
Drivers of this growth, Nelsestuen adds, include the need to update technology despite tight budgets and deferred investments, vendor innovations in both pricing and the delivery of more bundled IT and service options, and increases in the business value that vendors offer through expanded domain expertise.
"Technology and operations will become more integrated, and software will be embedded with infrastructure, bundled with managed services, and provided through both on-demand cloud services and more offerings of platform-based business process outsourcing,” says Nelsestuen.