Outsourcing help desk pays benefits in asset management

This is the second article in a series on IT outsourcing in the financial services industry. Mark Vernon reports on Business Process Outsourcing, an especially hot initiative in financial services. Read about the benefits Merrill Lynch realized in a deal with Unisys.

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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.

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