Strategic outsourcing is the norm for UK sell-side firms says BNP
The outsourcing of middle and back office functions by banks and brokers is now the norm, with nearly all firms outsourcing at least part of their functions to specialist providers such as custodian banks.
A survey of 50 senior figures, representing some of the UK’s leading sell side institutions, found that 86% of respondents outsource to some degree, with 20% outsourcing their back entire office. The survey, conducted by YouGov for BNP Paribas Securities Services, found that 78% outsource as a strategic, long term strategy to help focus on core activity, as opposed to only 4% focused on cost saving.
“The changes affecting our industry create more than simple cost concerns for our clients,” says Julien Kasparian, UK head of sales and relationship management for banks and brokers at BNP Paribas Securities Services. “They are facing the pressure of market change, a raft of new regulations and increasing technology costs. Providers of outsourcing need to be prepared to take on this burden for their clients, allowing them to focus on developing their core business; this is the way outsourcing can bring real value.”
The survey found that price is not the deciding factor when choosing a provider, as client service and product quality are shown to be the most important factors by far. Both were rated as ‘extremely important’ by 46% of respondents, where only 24% rated price as highly.
A final key finding shows that satisfaction with providers is not as high as it could be; an outcome which correlates with the complexity of outsourcing set-ups chosen by respondents. Only 26% claim to be ‘strongly satisfied’ with their provider, while 72% are somewhat satisfied. Broken down, the figures show satisfaction is lowest for IT system providers (5% ‘strongly satisfied’) while the average outsourcer uses around five different providers for this function.
“Clearly there is room for innovation to create new models of outsourcing,” said Kasparian. “We see consolidated offerings, where a variety of services are provided under one roof, as the best way to ensure smooth oversight and simple management of outsourced activities. We believe outsourcing providers who invest in the highest quality technology and specialist personnel will be the ones that keep clients satisfied. In any case, it is clear now that outsourcing has become the new norm for banks and brokers in the UK.”
The survey is available to download