Successful IT Outsourcing

As we have stressed time and again, IT outsourcing is an already appreciated practice and we should now move over the debate of outsourcing vs. in-house development. And the need to outsource your non-core activities increases in times of economic hardships such as the current global financial crisis. That’s the route JP Morgan is taking now, thanks to its acquisition of Bear Sterns and WaMu that have put more pressure to cut costs and meet shareholders’ expectations. In a recent BusinessWeek story, it was reported that JP Morgan has decided to increase its outsourcing spend in India by a whopping 25%.

So this means the second largest bank in the United States will put in around $400 million into its Indian outsourcing channel within the next 12 months. At the moment, JP Morgan is spending anywhere between $250-300 million in a year on outsourcing, most of which went to TCS, Accenture and Cognizant. Guy Chiarello, the Chief Information Office for JP Morgan, wants to make sure that his firm can reduce their overall IT expenditure, reported an expert who wanted to stay clear of any media popularity. Although the news has leaked to mainstream through a reliable source, the Indian and US offices of JP Morgan didn’t reply when contacted by some media folks.

In the light of the current financial crisis where banks were hit very hard, it would be no surprise if others followed the same path of outsourcing. But still, many other banks seem unsure of the route they will take when it comes to IT expenditure. The main problem is that large scale mergers and acquisitions of various financial institutions have necessitated big changes to the information architecture now.

This would basically involve merging each institution’s database so that customers don’t face problems even if they had an account in the bank that has been acquired by another one now. And besides, these companies also need to merge their software and online trading applications to present users with a single interface. All these changes require a huge budget and IT outsourcing seems to be the most feasible way to execute these tasks in the most efficient manner, given that Indian outsourcing service providers already have vast experience in dealing with offshore US-based clients.

While these are large banks with big budgets, the same thing can be done by small businesses too. With the future profitability of banking and real estate sector in jeopardy, people who have saved money now need to invest them elsewhere. Starting a new business may not be a very bad idea in this regard. And hiring offshore staff to take care of your IT needs is a good way to start with a low budget initially.