In 2003 Banco de CrÈdito del Per˙ (BCP) faced a number of business problems related to hardware and software refreshing. BCP, a large bank in the Peruvian market with 217 offices and 8,000 employees, paid less per seat for software and PCs than a smaller bank. But it incurred significant costs to purchase, upgrade, maintain, and train staff on hundreds of software applications and thousands of PCs, storage solutions, and other hardware. Subtler costs associated with its huge IT inventory were higher taxes on these in-house assets, policing approved software in each department so employees didn't deploy systems central IT had no control over, taxes on these vast IT assets, and even the costs of storage space of hardware that needed repair.
Along with transaction processing, these tasks were the core mission of the banks' internal IT departments. But creating new applications sometimes compromised that mission. What's more, other issues arose that took more immediate precedence.
To complicate matters, the bank had also adopted desktop hardware and software in an ad hoc manner from numerous vendors over many years. This problem was compounded because subsidiaries located in different countries had different business cultures, which tended to lead to technology adoption and management that was ad hoc also.
In January 2004, it bought into Hewlett-Packard's Access on Demand outsourced IT management solution. The outcome: it helped the bank get a handle on its vast computer inventory.
Problems scale with the scale of the bank
Ricardo Lopez, BCP TI Planning and Control Manager, says the bank in 2003 "had extremely high expenses" resulting from the ongoing purchase and support of its 5,500 desktop PCs in its back offices. Each year, the bank was spending heavily on the acquisition of new equipment to keep pace with the latest technological innovations, resulting in increased costs for equipment support, storage, and inventory.
Despite these efforts, it was also finding adoption and optimal use of its IT assets was not what it could have been among the user population. The combination of high cost and underutilization was undermining the bank's overall budget. The combination resulted in PC assets becoming obsolete before they were fully depreciated.
According to Lopez, "BCP needed a solution that allowed it to predict, reduce, and distribute costs. The solution had to allow the bank to renew its set of PCs with state-of-the-art technology that was adaptive to market requirements."
This would not be a task directed at departments alone -- the bank is actually a conglomerate comprised of its majority shareholder, Credicorp Ltd., a holding company that gathers financial investments of Grupo Romero and has 96 percent of the bank's shares, as well as several subsidiaries including Credibolsa SAB, Credileasing, Credifondos, and CreditÌtulos. Being a multinational with multiple subsidiaries complicated its IT management problems further.
One neck to wring, one hand to hold
When the bank adopted HP's Access On Demand, it was HP's job to maintain and support 7,000 users' desktops that interacted with a software base of more than 130 financial applications. The contract included storage, distribution, security, reinstallation, remote control of desktops, and other PC desktop-related services including automated inventory tools. In essence HP was taking over most of the contracts from other IT vendors from which the bank had previously purchased desktop resources.
HP did the following:
- Completed a leaseback agreement for 4,900 PCs
- Began a planned technological refresh over the next four years for 3,600 new PCs
- Transported and stored equipment on a national basis
These are and will be comprised of Compaq Evo desktop and notebook PCs running Microsoft Windows 2000 Professional/XP software. Service includes unpacking, inspection, installation, and integration with relevant external devices. Hardware support includes diagnosis, labor, and materials while software patches are routine. Desktop IT inventory reports are also included with monthly bills.
HP also instituted an overall service level agreement (SLA) for all hardware and desktop software for the bank's entire end-user operations and deployed comprehensive helpdesk capabilities it calls its Global Service Desk, which provides a single point of 24/7 contact for all covered services.
A gold mine of benefits
As a result, Lopez says "HP's Access On Demand solution currently enables BCP to predict its expenses and easily redistribute them among its cost centers, achieving increased efficiency and savings for the benefit of the company." In other words, subsidiaries and departments are specifically more accountable for their spending on their IT inventories, which incents them to tighten their purse strings.
Instead of maintaining PCs on an ad hoc basis, HP migrated the bank to a monthly service fee per PC that covers support, transportation, storage, and insurance. With granular accountability, a clear SLA, and per unit service fees, HP has eliminated all hidden service costs that were undermining the bank's profitability in the past. What's more, the ongoing fees eliminate large up-front costs for new resources.
So, says Lopez, bank personnel are more efficient and productive and are working with state-of-the-art equipment that HP upgrades or replaces at no extra cost to keep the bank on par with the general industry's state of the art. HP can even deploy extra PCs or PCs with extra chips it can "turn on" as needed when a solution needs to be ramped up quickly.
Now the entire banking operation is enjoying more than 10 percent reduction in its IT baseline costs, more granular and accurate cost allocation, quantifiable quality of service levels according to its SLA, and lower taxes on all IT-related services because HP claimed most formerly in-house IT assets.
In terms of competitiveness, the bank is also much more flexible and can adapt to market, competitor, and disruptive technology much faster now that it has an outsourcing provider whose core competencies are on-demand services.
Lessons from the Outsourcing Journal:
- By consolidating and outsourcing all desktop operations under one provider, large banks can bundle and shrink maintenance, and upgrade services for lower costs than those previously incurred for numerous providers of in-house ad hoc desktop services.
- The advantages of this strategy are even greater when subsidiaries of the main bank are located in different countries with different business cultures because technology adoption and management will tend to be even more ad hoc.
- Cost reduction is only part of such a value proposition. By setting up an SLA predicated on a cost-per-PC for a certain time period, the bank can predict and budget for the outsourced service and avoid large up-front capital outlays as it would with in-house desktop solutions.
- Banks gain an added advantage by making periodic technology refreshes part of the SLA. This way the provider insulates the bank customer from technology obsolescence without the bank having to take in-house resources away from core IT tasks.