Can Managed Services Rescue Financial Services?

Turmoil and struggles in the financial services sector are splashed daily on the front page of newspapers around the world. The industry faces a number of monumental challenges that are threatening and shaping its future. To remain competitive, forward-looking firms need to:

• Reduce costs
• Improve cross-sell and up-sell results from existing customers
• Shift capital expenditures to operational expenditures through variable costing and on-demand capabilities
  

Progressive companies in the financial services sector are aggressively using managed services technology to address some of these current challenges.

Serving Market Growth
The financial services sector currently spends more than 2.5 times more on technology than other industries. The way they can attack challenge number one is to shift the management of desktops, data centers, and call centers to a managed services model. Companies are using this option not just to reduce costs, but as a way to reallocate investment into growth initiatives.

One regional U.S. bank came to Cisco ISBG (the company's strategic consulting arm), wanting to quickly enter a new niche market faster than a competitor and increase its market share. Its tactic: deploy an end-to-end managed service, including both technology and business processes.

The economics of managed services lower the barriers of entry to niche markets that might not have been economical before; it also helps them determine success or failure more quickly, and act accordingly.

Managed Services Increase Customer Ties
In developing markets, companies are looking to use managed services to target customers who might not have used banks at all previously. A managed service that offers the underlying network infrastructure, including phones, provides them with an on-demand and scalable service that they can roll-out ahead of competitors.

To increase the amount of business conducted with customers, financial services firms are looking beyond the traditional world of financial transactions and services. One large bank we're working with wants to expand its relationship with its small and mid-size customers by providing them with essential services as payroll, procurement, and human resources.

Because the bank wants to roll out these services quickly, they will be created, delivered and managed by another entity through a managed services model.

Next generation managed services offer a real opportunity to transform the financial services sector. But success will require creative thinking, as well as both the development of strategic partnerships with managed services providers and proper governance models.

About the author: Stuart Taylor is a Director in Cisco IBSG. Stuart leads thought leadership and engagements with key Service Providers in managed services. He has over 15 years of experience focused on strategy, corporate development, business unit strategy, M&A and operational improvement with large mobile and wireline operators and high technology clients.

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Small Community Banks, Big Managed Service Benefits

Community banks have attracted new customers by offering a truly personal banking experience that their larger rivals can't match, and by maintaining close ties to local communities.

However, all bank customers are demanding Business Technology driven services that many community banks simply can't provide with their current infrastructures. The lack of the latest technology can make migrating to new services prohibitively complex and expensive.

Community banks have depended on multiple providers for their voice and data networks. These banks found that they were paying substantially more for their network connections than larger institutions.

Moreover, having to deal with multiple providers can strain the smaller bank's modest IT staff. Implementing and operating a new converged voice/data/video IP network would overwhelm an IT team that usually handles simple tasks.

In addition, deploying a new IP network could negatively impact the community bank's operating budget. In fact, the total cost of ownership (TCO) for a typical bank's voice and data networks is second only to employee salaries and benefits.

Truly Demanding Operating Environment
Adding to these business challenges is the banking industry's strong emphasis on security and business continuity. Banks must be certain that their networks can pass their banking regulator's annual IT audit -- and deliver 24/7 services to customers in the event of a major disaster.

A strict regulatory environment and tight budgets make community bankers conservative when it comes to implementing technologies they consider unfamiliar. One solution that's proven, and likely to deliver lower operating costs, is the out-tasking of IT and communication network needs to a managed service provider.

A managed service solution can reduce a community bank's recurring voice and data expenses by 10 to 25 percent, with even greater reductions possible for larger banks.

Less Restrictions, More Freedom to Innovate
That said, an out-tasked IT and network infrastructure scenario isn’t purely about cost-reduction, it's also an enabler of customer service innovation. As an example, community banks are now deploying TelePresence applications that simplify the challenge of delivering full-service offerings at their distant branch locations.

A customer at an outlying branch can contact a bank officer at another branch and talk face to face without having to travel a great distance for the meeting. Plus, all required transactions can be completed locally.

Small community banks can now gain big Business Technology benefits, thanks to the creative use of managed services.

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