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A Framework for Setting up a Banking IT Captive Center In India
Knowledgefaber, October 2012, Pages: 19
Over the past few months, Indian outsourcing industry has seen back to back compliance violations by well known third party vendors (first at HSBC and a merely a month later at UK based Standard Chartered Bank), as a result a lot of banking offshoring end up being captives rather than third party outsourcing. IT debacle at RBS also supported the point of having self managed captive centres. Considering the fact Knowledgefaber has studied the intricacies of the industry and came up with this research report on “Banking IT Captive Centre in India”.
In the last decade, decisive changes in the global business environment have left commercial banks with a competitive cost disadvantage relative to other banking firms in both core and noncore functions. To rescue banks form such a scenario, IT innovations offer a production option to offer cost reduction to banks. Technology integration solution force banks to take a strategy based outsourcing decision.
Before taking a decision on outsourcing, banks have to consider many things like how to go (strategy in terms different outsourcing approaches), where to go (Country and then city identification), what to outsource (what all functions need to be outsourced) and many more. Knowledgefaber's this report focuses on such concern areas very explicitly and provides solutions for all such apprehensive avenues.
In order to identify the best strategy, detailed research has been made to understand the benefits of captive (GIC) centres and third party vendors in present scenario, considering the recent debacles in the banking outsourcing Industry. Report includes a calculated cost arbitrage of more than 50 K USD per FTE for the studied IT operations between the parent and captive centre in India.
At the second step, where banks are zeroing down the city location, a detailed city and skill based talent pool study has been carried out. Results show an availability more than one lakh twenty seven thousand people with relevant skills across the various tier -1 and tier -2 cities in India. Banking IT Captive centers have a dense presence in Mumbai with the single point presence of many global banking giants like BNP Paribas, Credit Suisse, Morgan Stanley, Nomura India Services etc. On the other hand banking IT captives centres have a very scarce presence in cities like Pune and Hyderabad with selected giants like BOA, JP Morgan, HSBC Software development India and I-Nautics (BNY Mellon's Subsidiary).
The total available talent pool also considers the presence people working at those vendor's who have a banking product of their own, for instance Infosys having Finnacle, TCS having BaNCS, IBM having Cognos, etc. Hence the above mentioned total talent pool is such distributed amongst the cities across India that Bangalore has the highest proportion of around 27.3% talent, followed by Chennai with 21.1% talent, Mumbai has around 16.2% talent availability, cities like NCR and Hyderabad has very comparable number of talent pool at around 10%. Though being a metro Kolkata has a mere presence of just 2% talent pool in the city. The same talent pool has also been studied for the various domain skills like COBOL, Java, UNIX, Testing, BA and MDM across cities in India.
The report provides a practical framework that banking firms can use to identify best fit outsourcing strategy giving a detailed picture of Indian market and talent pool. In particular, it provides a detailed analysis on how banking firms should go about outsourcing with various Indian markets' competitive advantages. Banking firms should very clearly understand which processes to be kept internal and which to be outsourced based on both organizational capability and opportunities available.
In additions to Global In-house Centres (GIC's or captive centres), banks are opening centre of excellence in low cost countries like India. These centres provide research, technology and training support in focused areas. For Instance, In Fidelity, over the past two to three years, the India centre has focused on developing research and analytical capabilities and hence developing it as a centre of excellence. In another case Deutsche Bank has built a strong technical team in India over the past two years. Sandhya Vasudevan (head of the bank's captive centre business in India) has a global role, which is very evident as there are teams in other places like London that report to the India team. The report gives a perfect picture of centres of excellence across the country, with technologies like Cloud computing being worked upon in southern cities like Hyderabad, Chennai and Bangalore. Financial capital Mumbai has centres involved in grass root level innovations in the fields of BI, maintenance and testing.
The rationales for the discussed outsourcing strategies are adequately justified by facts and figures in the report. A detailed case study from a few representative banking captive firms has been carried out to strengthen the conclusion which emphasis on captives being the key growth drivers within the organizations.
1. Introduction: The core idea
2. Present State: Outsourcing in India
3. A Comparative Study of different outsourcing options
4. Why Outsource to India
5. Indian talent supply study
6. A note on Centre's of excellence
7. Case Study
8. Analysis & Conclusion
- BNP Paribas
- Credit Suisse
- Morgan Stanley
- Nomura India Services
- JP Morgan
- Deutsche Bank