At the top level, Gartner forecasts that outsourcing — which represented 47 percent of IT services spending in banking in 2001 — will constitute 52 percent of IT services spending in 2006. Although this increase partly stems from “megadeals,” such as the IT outsourcing deal between J.P. Morgan Chase and IBM, outsourcing represents a growing piece of the spending pie for midsize banks as well.

Midsize banks are starting to attract attention from technology service providers in their own right. However, sourcing approaches at midsize banks tend to focus more on vendor selection than on vendor management, and regulators in financial services have identified this as a potential risk. Banks can address this risk by taking a more-balanced approach to sourcing and incorporating vendor management practices into business processes on an ongoing basis.

One of the benefits of structuring vendor management comes in getting a better overall sense of how the bank is using outside technology providers. This is particularly important, since many banks have outsourcing arrangements that were signed separately and may not be coordinated or “visible” at the enterprise level. Getting a total view of sourcing contracts under way can also be useful as a tool in ensuring that sourcing decisions align with business strategy.

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Reference
General Session, Midsize Enterprise Summit
Sizing up the Role of IT in Midsize Banks
Presented: September 11, 2003
Presented by: Susan Cournoyer, Principal Analyst, Gartner