BankCo*, a large bank, had a complex and inefficient tech infrastructure. Its costs were significantly above the industry standard, thanks to legacy systems, regulatory issues and a lack of scale. Management wanted to reduce costs by 30%, so the company hired an external service provider (ESP) to initiate and drive a technology outsourcing initiative. But BankCo did not create a thorough deal rationale and skipped the financial analysis and request-for-Ppoposal (RfP) process. This created a range of business and IT issues.
BankCo found itself unable to execute the deal alone and asked us for support.
Our team devised the following approach to turn around and successfully execute the deal:
The Bain team issued the following recommendations:
- Enforce board involvement
- Initiate/manage involvement of bank-wide stakeholders
- Help to align outsourcing initiative with business and corporate strategy
- Retake process control from ESP and actively drive negotiations, contract design and communications
- Completely rebase financial and strategic deal analysis
- Assess ESP's cost base and enhancement initiatives to estimate ESP margin and potential of "managed base case"
- Drive comprehensive risk analysisokay effort as basis for regulatory approval process
Bain managed to finalize the multi-billion Euro outsourcing contract.
We helped to create tangible value through outsourcing. Developing an alternative "in-house" scenario was key, providing a decision-making baseline and comparator for executive management.
* We take our clients' confidentiality seriously. While we've changed their names, the results are real.