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The
first article of this series on IT outsourcing in the financial services
industry focused on negotiating the
outsourcing deal with the supplier. In this article, I’ll describe a
Business Process Outsourcing (BPO) initiative that yielded positive results for
help desk functions at a large investment services company.

During
the downturn, BPO is the outsourcing activity that held up better than any
others, according
to the research firm Gartner, which defines BPO as the “delegation of
one or more IT-intensive business processes to an external provider that, in
turn, owns, administers, and manages the processes based on defined and
measurable performance metrics.” Financial services is one
of the major markets for BPO, particularly its payroll and call center
functions. Financial services pioneered BPO, and leads other business sectors
in spending in this outsourcing area.

What
has changed more recently is a move from massive BPO projects, such as
outsourcing an entire HR department, to more modest deals. The point here is
that financial services firms and their partners have learned that functions
such as payroll and call centers are easier to standardize: this suits the BPO
partner, because it can develop economies of scale; and it suits the bank,
because it can outsource the operation with less fuss and, when complete, get a
better fit.

Making the outsourcing decision

In
2001, Merrill Lynch
decided that its IT help desk would be a good candidate for BPO. After a search
process, Unisys
was chosen to manage the support function for approximately 11,000 users in the
United States and the United Kingdom. The help desk was broken down into a
number of components: a help desk for routine troubleshooting; a service to deal
with hardware failure; desk-side support for investment managers; and associated
procurement processes, asset management, and reporting functions.

“We
required a better quality of service than before and one we couldn’t easily
create ourselves,” explains Stewart Carmichael, Merrill Lynch Investment
Managers Europe Global Head of Technology and Applications Services. “We
went to Unisys because help desks are their business.”

However,
although the arrangement ultimately worked well, Carmichael has a word of
caution. “Organizations not experienced at buying services shouldn’t underestimate
the size of the challenge from a service management perspective. We had to
adapt our business to an entirely new process and Unisys had to understand our
environment, our business drivers, and most importantly, the Merrill Lynch
culture, if it was to help us achieve our business objectives.”

Developing
the cultural fit between the two organizations demanded new thinking from both
sides. Carmichael explains: “Unisys and Merrill Lynch first had to define
what partnership means then develop a process, put it in place, and standardize
it across the different businesses. Second, we had to understand how such a
partnership could add value outside of our normal business. Finally, to support
this idea, we wanted a level of measurement, a common understanding to the
business relationship and our shared goals.”

Unexpected benefits

To
achieve these goals, a customized governance model was established. This model
involves monthly executive steering meetings and a quarterly assessment against
an analysis of progress and performance. Jon Wimpeney, Merrill Lynch’s Global
Markets and Investment Banking Technology Group Director, continues: “It
took a year for the new structure to stabilize. The partnership project allowed
us to develop a consistent set of questions and have them answered reliably,
which in turn gave us a relative measurement of progress. Between us, we
devised a series of key performance indicators underpinned with a capability
maturity framework, and as a result, we can now track our progress, the user
experience, and with it the service level we are receiving from Unisys.”

For
all that BPO is driven by the headline business functions, such as a reduction
in capital investments and operating costs, Merrill Lynch found that softer
deliverables such as asset management reporting and procurement billing turned
out to deliver some of the most notable benefits. “Originally we thought
if we could reduce our IT costs by 20 percent we would be entirely satisfied,
and Unisys was prepared to offer the price-point and the service we wanted.
However, not only is the service provided by Unisys more cost effective than we
had before, we now have primary services that didn’t previously exist, the
first of these being asset management, which allows us to look at every user
and understand what they have, where it is, and who owns it,” Carmichael
says.

Merrill
Lynch was a tough customer for Unisys. Carmichael admits they were both
sceptical and cautious. However, the BPO partnership worked. The key success
factor was the mutual recognition that an understanding of business culture is
as important as understanding the business processes.