Service provider management — important determining factor of successful sourcing relations

With regard to the increasing complexity on the part of potential service providers and supervisory authorities, financial institutions that outsource and/or are willing to do so will face new and ever more complex challenges in the area of service provider management. An adequate and tailored list of measures can successfully meet these challenges, provided it is consequently applied to the main fields of action of the service provider management. In the end, it can also be the decisive factor whether an outsourcing project is and/or will remain economically reasonable. Sourcing is—not least due to the constantly growing cost pressure and the increasing level of competition, in particular in the financial services sector—a sustainable trend with an extremely high volume. One example of this trend is the fact that the financial services sector represented the largest sector with a share of approx. 40% of the total volume of the global outsourcing market in the year 2013.
Figure 1: Development of the global outsourcing market (2007–2013)

Furthermore, it is worth mentioning that the volume growth in the financial services sector is being driven by companies that are outsourcing for the first time, and an increasing number of regional and/or medium-sized companies. However, not only the demand for sourcing is on the increase. For their part, the number of service providers is growing and the services they offer are expanding and becoming more complex. Moreover, the rising importance of sourcing brings more national supervisory authorities to the scene which, for their part, have a huge influence on the financial services sector due to increasing requirements for controlling and monitoring the service providers. Thus, it is not surprising that the financial services sector faces a myriad of challenges in relation to managing existing sourcing relations. These challenges mostly stem from the non-transparency of the service provider market, the implementation and/or fulfillment of regulatory requirements and missing established market standards in sourcing relations.

Figure 2: Major challenges in the service provider management

zeb usually meets these challenges in terms of establishing and optimizing a service provider management in its project approach with a series of measures in five main fields of action.

Figure 3: Overview of fields of action

A function / process map for elaborating a service provider management (field of action 1) ensures that the service provider management is involved in the entire outsourcing process. Further, this map guarantees a close interaction of service providers and the service provider management.

The conceptual design of the functions and processes of a professional service provider management considers the fact that they are supported by certain tools and standards (field of action 2). In this field of action, the toolbox with standardized tools (presentation and form templates, check lists, calculation models, etc.) is adjusted to the client in order to ensure and support efficient processes in service provider management.

The “limitation and interfaces” (field of action 3), “staffing” (field of action 4) and “organizational integration” (field of action 5) fields of action jointly define the level of integration of the service provider management into the interaction between the service provider and the outsourcing institution, as well as the conceptual design of the organizational structure.

The service provider management should ideally function as a “hinge” between the central contact persons (e.g. service managers) of the outsourcing institution and the service provider. Depending on the specific sourcing relation, the integration in several specific processes (core processes) should be more intense than in other processes (field of action 3). The organizational integration of the service provider management (field of action 5) as central, independent (most reasonable by experience) or as decentralized organizational unit determines the field of staffing of the service provider management (field of action 4) together with the integration level in the relevant processes (field of action 3). Identifying staffing is carried out by means of proven procedures. Project experience shows that the quality of sourcing relations continuously rises in a significant and measurable way, provided the measures are consistently implemented in the main fields of action. Furthermore, cost savings of up to 20% can be realized. Thus, the measures and fields of action for optimizing the service provider management mentioned above can substantially contribute to making a sourcing relation for an outsourcing company a success.

Feel free to contact us!

Dr. Ludwig Reßner

Manager zeb Munich

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