Outsourcing to an application service provider is not a technical solution to a technical problem, and has to be looked at from a business perspective, says Financial IQ MD Les Horne.
Speaking at the IQ Business Group`s new economy symposium at the BDFM financial summit recently, Horne said several events in the market are driving a move towards outsourcing in the financial services sector.
Included among these are convergence and consolidation (such as the rise of bancassurance), cost pressures, staff pressures and business and market pressures.
New companies are coming into the market and "cherry picking" in various areas, which is creating competitive pressure. In addition, no real new funds are coming in, but there is a lot of churn in the market, putting pressure on margins.
The result is that consolidation occurs as companies seek to reduce the cost base. A shortage of IT skills compounds the situation, which has led groups to look at IT and ask whether it is core to their business.
Horne notes that demands for applications are increasing, as is the complexity of the applications themselves. Delivery times are shortening while the skilled resource availability is shrinking.
At the same time, market need is increasing due to several factors, including the rapid emergence of the Internet, increasingly complex computing environments, enterprise focus on core competencies, a labour shortage and the need to support packaged applications.
"Thus, companies say there is perhaps a need to look outside to be able to deliver these solutions," he says.
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