Pub. 5 2010-2011 Issue 4

www.nebankers.org 18 Extraordinary Service for Extraordinary Members. A BANK MUST CONSIDER MANY factors when contemplating a switch to an outsourced environment. Below are five leading issues that have surfaced with in-house banks that are considering the move to outsourcing. THE ECONOMY Perhaps one of the most powerful driving forces behind a bank’s decision to outsource is the unpredictable cost associated with data processing. Outsourcing can be an attractive alternative when a bank is faced with unexpected capital outlays. Over the years, many bankers have been un- pleasantly surprised when a hardware vendor or the in-house Information Systems (IS) management team has suddenly voiced the need to upgrade the hardware to accommodate a new software release, or to enable the bank to offer new services to their custom- ers. Many expenditures in the area of computer hardware or IS infrastruc- In to Out: Banks Are Migrating The Top Five Factors Driving Banks to Make the Big Switch to Outsourcing Ralph Borenstein , Jack Henry Banking ture are described in fairly technical terms and can be foreign to banking executives. The requirements and the sense of urgency behind such expendi- tures are not always fully understood. When comparing hard dollars, out- sourcing may not always be the less expensive alternative. However, many banks believe the benefits of outsourcing offset any additional costs. Banks like the predictability of month-to-month expenses and the ability to rely on the vendor tomanage unexpected expenses. MERGERS & ACQUISITIONS Many CEOs and a large number of operations managers recognize the value of outsourcing when considering the impact of an acquisition. Themany moving parts of the acquisition process can have an immediate impact on a bank—from a resource drain on the organization to unanticipated capital expenditures on the IT side. When considering this “brave new world,” it makes sense to utilize a technology expert to manage these activities so that bankers can focus on the business at hand. Another great advantage of outsourcing is the “utility” aspect of this processing environment; with out- sourcing, bankers can “plug in” to only use those services they need. REGULATORY & AUDIT ISSUES The cost and impact of regulatory issues is driving many decisions at banks today. Community banks realize they may be under the radar right now. Many view the outsourced solution as valuable because of the availability of the “third-party audit.” In addition, the regulatory agencies (i.e., Federal Financial Institutions Examination Council, or FFIEC) and audit entities are spending increasing amounts of time on their examinations in banks. Community banks find it difficult to commit resources to these activities. An outsourced vendor can leverage its own resources to work