ABA Banking Journal - November 2007 - (Page 58)

Tech topics have picked up sophistication and have a deep knowledge base to draw from. Increasingly, more offshore workers have the skills to operate as true stand ins for their bank clients. You see this for capital markets—equity research and fixed income research, for instance. In the case of mortgages, these experts can help with the credit evaluations or do other valueadded process work. The intellectual bar has been raised. So increasingly, banks have more sourcing and can transform fixed costs into variable costs. area, there is more scrutiny generally surrounding this area. It’s been said mortgage providers are very picky about their service level agreements. What are your thoughts? Well, it makes sense, doesn’t it? The mortgage industry is regulated. In the mortgage work that we do, offshore and otherwise, we are very scrutinized and deal with a variety of mixed performance metrics, anything from standard IT performance metrics to more process oriented metrics of the Six Sigma sort such as number of defects per million. Now, with recent fallout surrounding the subprime Many banks are broadening their outsourcing commitment, despite any remaining stigma Sure. The need to drive costs down is a big reason why. I’d say that the top 25 banks, and all global banks, have some sort of evolved global sourcing capability in a variety of areas. Certainly, investment banking firms have a good decade’s worth of experience with outsourcing all sorts of processes and have learned about the management challenges associated with the work. Now, more banks see it as an option. You wrote a white paper about how business process management supports business process outsourcing. That’s right. One of the themes is how outsourcing can be an incremental affair. there isn’t a “one size fits all” approach to either sourcing or project management. Being successful is all about coping with many details and evaluating the particular situation. So, there’s no reason why it has to be an epic, top heavy, tough-to-manage engagement. You can start with discrete steps and grow into having deeper, more complicated contracts. Another point that appears in the paper has to do with business transformation. Traditional methods of process analysis have been labor intensive, manual, and slow. The newer technologies allow you test out Outsourcing a mainstream deal A few years ago, when Lou Dobbs became the face of American outrage on the subject of outsourcing offshore, the air of stigma surrounding the practice was thick on the ground. Now, gradually, the accusatory mood has lifted. Dobbs is still crusading on behalf of a problem many characterize as an eroding middle class, but his focus has broadened to many sources of trouble, not just jobs going overseas. And businesses are doing what makes sense for them. Meanwhile, in the daily world of retail and commercial banking, where cost scrutiny never went out of fashion, outsourcing has quietly but insistently become more the norm. Most of the top 20 U.S. banks outsource and, global players like Citi have captives in international locations. Business process outsourcing (BPO) is taking a broader role in the mortgage industry as part of this. Sure, the subprime-related downslide may have exacerbated cost concerns, says Andy Efstathiou, director, Banking Benchmarking and Outsourcing practice, with NelsonHall, but the need to turn high fixed costs into more controllable variable ones, predates the present crises. “The adoption of outsourcing has long been cyclical and is accepted as a fact of life,” Efstathiou says, adding that currently, many U.S. employees are taking jobs with outsourcers that happen to operate internationally. “And, the Wipros and Infosyses of the world aren’t quite yet large enough to take over all mortgage work for a big U.S. bank—in fact, firms from India position themselves as true partners, a way to eliminate 10% of the workload.” Efstathiou points out that, today, although mortgage administration is typically being outsourced, certainly, third parties will do work such as credit evaluations in the near future. “Banks need to create a kind of ‘glide path’ to downsizing their operational costs,” he says. The consultant’s research shows that today, in a variation on traditional correspondent banking, bigger banks provide mortgage work to smaller, local bank clients. Yet, NelsonHall anticipates that offshore mortgage services delivery will increase over the next year or so, with the global mortgage administration market reaching $3.2 billion by 2008. The firm predicts that a multi-shore model will emerge where any number of processes including skip tracing, welcome calling, and asset verification are undertaken offshore. Componentbased technology (via web services, most typically) and re-engineered business practices that emphasize efficiency and accuracy will also be featured. 58 NOVEMBER 2007/ABA BANKING JOURNAL www.ababj.com/subscribe.html http://www.nelson-hall.com http://www.ababj.com/subscribe.html

Table of Contents Feed for the Digital Edition of ABA Banking Journal - November 2007

ABA Banking Journal - November 2007 Contents Editor’s Column Briefing: Good News for Mortgages Sleight of Mind N.Y. Hiring Bonanza May Be Bane Snapshot: A Look at Held-For-Investment Loan Growth ABA Resources ABA Chairman’s Position “The Moose Bank” Thrives on Manufactured Housing Loans Finding the Middle Way for Your Bank’s Retirement Program Pass the Aspirin Cover Story: Self-Service Steps Up DIY U.K. Style Marketing to Millennials Getting Real With “Gen Wired” Ethnic Marketing: Disinterested Banking Getting Good at Global Sourcing Case in Point Turn Compliance on It's Head Banker’s Mart To Advertise/Index of Advertisers The Economy

ABA Banking Journal - November 2007

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