Filipino banks wary of outsourcing

07.12.2004
Von Grace S.

While outsourcing has been gaining adherents in banking industries across the Asia-Pacific region, banks and financial institutions based in the Philippines continue to be cautious about letting third-party service providers handle the IT component of their businesses.

In a recent interview, Hewlett-Packard Philippines director for Enterprise Sales and Presales Arturo Baqui admitted that local banks remain ?uncomfortable? and ?apprehensive? about ?letting go? of some of their business functions, including IT.

At the moment though, HP, according to Baqui, is holding talks with a number of local banks who have all expressed ?interest? in outsourcing.

?Local banks are still getting the feel of outsourcing; they are still trying to establish that ?comfort level?,? he said. ?However, the good news is that some banks have already started testing the waters by outsourcing ?bits and pieces? of their operations such as customer help desk and IT asset management.?

The HP executive believes that the managed services they currently provide these companies will serve as a test bed and, eventually, a springboard for introducing IT outsourcing to the local banking sector.

?We have drafted various outsourcing models for the local market, including ?transition outsourcing? and ?selective managed services? that cover help desk service and IT asset management,? Baqui said. He expressed the hope that, with the success of these initial services, local banks will be eventually convinced to adopt outsourcing on a bigger scale.

?I am confident that we will get into that stage. How soon (that is going to be) will all depend on how existing outsourced services such as help desks perform,? he said.

Infosys Partner

HP has strengthened its capability to service not only the IT requirements, but the core banking technologies needed by the banking sector with its recent partnership with Infosys. The two companies have joined their expertise to provide banks with a comprehensive suite of software, hardware, networking, system integration, consulting and outsourcing options.

Through a core banking solution called Finnacle, the two companies aim to provide an all-in-one solution for banks seeking to upgrade their legacy platforms. Finnacle provides functionality across the front and back offices, high scalability, and availability. It addresses the core banking, e-banking, treasury, wealth management, customer relationship management, and cash management of universal, retail, corporate and private banks worldwide. The solution includes a security framework that is compliant with CoBIT, an industry standard issued by the IT Governance Institute for good IT security and control practices.

According to Mark Stepehens, HP general manager for the Financial Services Industry in Asia Pacific, Finnacle is targeted at Southeast Asia?s fast-growing financial services sector, whose IT spend in banking, financial markets, and insurance sectors, based on International Data Corp. figures, is expected to grow from approximately $2.73 billion this year to about $4.03 billion by 2008.

?Across the region, the banks? core banking systems are up for replacement in the next two to three years. In fact, most of the banks? top agenda is to replace their core banking systems,? Stephens said. He estimated that about 50-60 banks in the Asia-Pacific region will be replacing their legacy banking systems within the next three years.

The HP executive explained that Southeast Asian banks are now facing increasingly complex internal and external environments that require greater business agility and a reduced cost structure. Banks, he noted, need to attract and retain customers by expanding their product offerings and ensuring fast go-to-market for new products and service offerings. In addition, banks also face ?macro-level issues? such as new compliance regulations, and the influx of foreign investments that drive growth and demand for new products.

?Banks in Southeast Asia are beginning to recognize the need to use IT as a key tool to gain competitive edge,? Stephens said.