IBM Information Technology Services Global sourcing.

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1 IBM Information Technology Services Global sourcing. Move with agility and challenge competitors worldwide.

2 Globalization. Growth. Compliance.» The challenges that you face today in the financial services industry are tougher than ever. No doubt you have examined your operations carefully, looking for ways to trim costs and make your organization more profitable. Perhaps you ve made significant strides in operational efficiencies by consolidating your core banking infrastructure, standardizing payment or policy processing across the enterprise, or outsourcing some of your IT labor. But you can t afford to stop now your competitors certainly won t. They will continue to look for ways to achieve breakthrough cost savings and efficiencies that will boost profitability and pave the way for growth. So, what s your next move?

3 The key is to rethink your business strategy and execution. Increase focus on core competencies and find more efficient ways to manage non-core activities. Take advantage of regional variations in taxes, labor and regulatory requirements. Many financial services firms have made global sourcing a key part of their business strategy. It may make sense in your organization, as well. You may have already considered the benefits of global sourcing. Many companies in the financial sector have gained a distinct advantage by diversifying their IT sourcing tactics. These organizations learned that off-loading non-core IT activities to third-party providers had the potential to significantly reduce costs and improve efficiency. Furthermore, they came to realize that their outsourcing options had expanded dramatically. In the past decade, IT providers around the world have emerged to accommodate the full gamut of operational needs with measured efficiency and economy. Industry leaders have set the standard for global sourcing, and are rapidly making it an essential element in every financial company s ability to compete. Yet many companies remain cautious. Because they are subject to industry regulations and intense scrutiny from customers around the world, financial services organizations can t afford downtime, security gaps or performance problems. And they re concerned that global sourcing will bring too many risks. Offloading critical operations can limit control over availability and performance of critical systems, such as core banking, policy administration or credit card processing applications. Physical distance can make communication and collaboration with the third-party vendor seem difficult, especially when multiple time zones are involved.» Many companies in the financial sector have gained a distinct advantage by diversifying their IT sourcing tactics.

4 You ve got to balance risks and rewards. Here s what to look for. To avoid losing control over availability and performance, some companies limit themselves to outsourcing small portions of their IT operations to specialized vendors. While this strategy helps keep operational control in house and creates some variability in costs, it may limit the rewards. With all the extra coordination involved, the management costs often outweigh the savings. Other companies attempt to strike a balance between the benefits of regional cost savings and the risk of losing control by creating near-shore or off-shore captive operations. However, they retain all the burden of managing a large infrastructure and, as a result, may lose the benefits of cost variability and operational flexibility. There are other options that will help you optimize benefits and reduce risk. The most significant potential for cost savings emerges when companies adopt an extensive global sourcing strategy that transfers risk and accountability to a partner that specializes in IT management. Low risk, low reward Balancing the risks and benefits of outsourcing Look for global vision and strategy that suit your needs Traditional IT sub-contractors Near-shore captive Today, financial services organizations like yours have a great deal of flexibility with respect to outsourcing options. IT providers around the world vie for your business, many of them promising lower costs that are typically due to less expensive labor. However, vendors that focus simply on relocating laborintensive activities to low-cost regions may not be able to offer important capabilities, such as strong local management, consistent business controls, a steady workforce and local business partners. The key is to secure an outsourcing arrangement that supports your unique business needs whether you aim to boost profitability, improve compliance processes or increase flexibility to meet your customers changing Off-shore captive (25 40%) Off-shore outsource (40 60%) Higher risk, higher reward demands. That s why it is important to begin with a thorough assessment of the provider s business practices and offerings. Take the time to understand how the provider invests and hires around the world. Its vision should make sense economically. Its strategy should be designed to help you reduce risk, strategically deploy capital and maximize your business value. Consider also the vendor s specific capabilities and offerings. Your organization likely relies on several business-critical systems, many of which need to work together smoothly and require a wide range of administrative tasks to maintain. Working with a single vendor may help reduce the management burden on you, minimize the amount of integration work and establish economies of scale.» The most significant potential for cost savings emerges when companies adopt an extensive global sourcing strategy that transfers risk and accountability to a partner that specializes in IT management.

5 Look for consistency and reliability When you adopt a global sourcing solution, you want a provider that manages IT better than your company can do it in house. Efficient, effective management processes are essential to maintaining a highly available, security-rich environment. You will more likely receive consistent, reliable and transparent quality of service if your global sourcing provider has established standard systems management processes, methodologies and integrated tools under a global delivery model. No matter where your IT operations are hosted perhaps across multiple facilities in several countries they should be governed by the same time-tested standards and skills competencies. This principle holds true especially for security, risk mitigation and business continuity plans. As a financial services organization, you can t afford to make an outsourcing decision that would put your business at risk of downtime, privacy violations or data loss. Make sure to work with a company that enforces a cohesive risk mitigation program one that prepares it to coordinate activities across facilities to help prevent outages and recover quickly from disasters. Look for a resilient, security-rich infrastructure The security and performance of your systems are likely among your top concerns, and perhaps the most difficult to address in house. With as much data as you store for regulatory purposes, your organization probably needs sophisticated backup contingencies, which can mean implementing, staffing and maintaining a second, remote data center. The high volume of traffic on your network calls for a redundant high-speed backbone that can maintain availability during your busiest periods. The expenses associated with these measures can make business resilience an impractical task for most companies. When you seek these services from third-party providers, you aim to benefit from their economies of scale: fully configured and hosted infrastructure components, state-of-the-art networks, established hot backup sites and mature, comprehensive solutions for physical security, logical security and management processes.

6 Look for a smooth workload transition The transition phase can be one of the most critical steps in an outsourcing engagement. You may have a global sourcing agreement that matches your business needs, but if you haven t thought about how the workload will transfer to the new IT provider, you may encounter availability or service quality problems. Make sure the provider focuses the proper management attention, technical skills and methodology needed to minimize business disruption. Look for an expert staff, on demand There s a reason that companies are using global sourcing to find less expensive labor: Maintaining an IT staff in house can be difficult and expensive. Even if you manage to find the experts you need, it may be difficult to retain high-demand skills. And training presents an ongoing expense. Global sourcing can remove the burden of assembling an expert staff and make labor costs more variable. Creating significant cost savings in this way may seem like a sure thing. However, not every provider can optimize its workforce for optimal savings. Many global sourcing providers struggle with high attrition rates, which drive up costs. It also means that the skills you rely on might not be available at all times. Ideally, you want to rely on a large, stable workforce that provides a wide range of skills you can count on whenever your business needs require it. Transfer the risk to a seasoned provider so you can benefit from global sourcing IBM Information Technology Services can help mitigate the potential risks associated with global sourcing so you can take advantage of the benefits. Our capabilities enable us to make contractual agreements that place responsibility for service levels squarely in our hands. IBM has spent the last few decades developing offshore resources investing locally, sourcing talent from around the world and continuously adjusting our offering portfolio to serve the evolving needs of clients. Today, we operate 343 data centers around the world and hold more than 500 outsourcing contracts worldwide, ranging from US$2 million to almost US$1 billion per year. Some of our clients have reduced costs by up to 60 percent. We continue to expand our global infrastructure, investing US$150 million annually and spending billions of dollars each year on research.» IBM Information Technology Services can help mitigate the potential risks associated with global sourcing so you can take advantage of the benefits.

7 » Know your options. Today s global IT sourcing capabilities include: Infrastructure management Help desk IT security Application support Virus prevention and control Software upgrades and delivery Backup and recovery Asset management Our management processes are certified under CMM, ISO 9000, Six Sigma and Baldrige Awards. For more information Global sourcing has begun to reshape the financial services landscape. Many companies have already started the journey, fostering growth by focusing on core competencies and increasing efficiency by taking advantage of regional variations in taxes, labor and regulatory requirements. The best and most actively engaged companies are progressing rapidly, but none have finished. For more information about how IBM Information Technology Services and our global sourcing capabilities can help you on your journey, contact your IBM representative or visit: ibm.com/services

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