Outsourcing Excellence Award – Best First Steps – Bank of India and HP
There are three kinds of banks in India:
- Government-owned, large banks, such as Bank of India
- Private sector and public smaller banks
- Foreign banks, which bring in technology from abroad
The foreign banks have done some outsourcing, while the private Indian banks have not. The Indian banks typically own, run and manage their own technology departments, while the public-sector banks have just started large technology implementations.
The Bank of India not only recognized that transaction processing and other supporting systems were necessary to succeed but also realized that these were not their core competencies. Outsourcing would set the pace for business agility by permitting the bank to focus on core business drivers.
In addition, the bank wanted to transform its technology from COBOL-based software, distributed computing and a decentralized database model to new technologies. They would give the bank a unified customer view, help in scientific decision-making, and allow faster time to introduce/market products. Most critical from a business perspective, the bank believed outsourcing would help it face competition from both public and private sector banks, including leading multinationals, who were moving ahead with “technology-enabled transformation.”
The bank chose HP as its outsourcer to manage applications, build and manage the data and disaster recovery center, supply technology and establish a help desk for employees. In addition, HP manages and maintains the entire IT infrastructure across 750 branches, which deploy core banking and data-warehouse activities, plus it assumed responsibility for Project Management, Configuration Management, Change & Release Management, Incident & Problem Management, Capacity Management, and Availability Management.
The scope of the 10 year, $150 million, contract covers 11,000 in-scope users, six million transactions, and 40 million accounts, and has a very detailed and granular service level agreement.
The selection process was very tough and a lengthy one. We took one year to arrive at the right company. Even companies from abroad responded. We read about 20 respondents.” said Krishnamurthy. “We found finally that HP met all of the requirements.”
First Of Its Kind
The relationship between Bank of India and HP, a truly large, comprehensive and transformational outsourcing relationship, is the first of its kind within the Indian banking industry and first of its kind within India. Multiple complexities exist in executing this project, which includes current infrastructure inadequacies, the sheer geographical spread of 750 locations across India, and interfacing existing legacy applications with new technologies that HP is deploying. All this requires a coordinated effort from the bank, HP and the sub-contractors to make this relationship successful over the tenure of the contract.
Bank of India spent over a year analyzing the cost and other factors such as the benefits, the growth in volume, and the kind of services it would be able to offer. According to Krishnamurthy, “Now, we have all sorts of delivery channels that can be handed over to the customer and we can meet the competition coming from the other foreign and private banks within the country.” The analyses, especially the availability of new delivery channels, were critical to selling the benefits and value of the outsourcing partnership to the board of the bank.
Foundation For The Future
Although it is a little too early in the relationship for any hard business benefits to accrue, they have just completed the pilot stage, and both partners declare the pilot “very, very successful.” The goal was to complete the pilot stage within 100 days, including hardware and software, and HP met the target. The bank has been able to centralize 10 branches offer various delivery channels to its customers, such as internet banking and tele-banking.
Bank of India and HP believe they have established the foundation for the future based on mutual trust and confidence in each other’s competence. “I see a total commitment from the Bank of India team and from the HP team. We have a lot of branches, and all are very enthusiastic. The HP team are very enthusiastic as well.” states Krishnamurthy.
The parties hold regular steering committee meetings for formal status updates and decision-making. The steering committees are comprised of representatives from the bank and HP as well as the other major technology vendors, engaged in forward planning for continued roll out, with the sustained support from Bank’s top management
This relationship is built on a strong foundation of trust in HP for its technology excellence and the bank for its vision to build an IT enabled customer centric organization. With the size of the initial contract, the expansive scope of work and georgraphical dispursion, Bank of India and HP are the vanguard in banking outsourcing in India. In the absence of any proven success stories or case studies for this type of relationship, they broke new ground throughout the lengthy selection process and detailed negotiation of both the contract terms and conditions and service level agreements. Both believe they have established the groundwork for a mutually successful and long term outsourcing partnership.