Financial Service Companies Brace for Significant Round of Migration to 3rd Party Outsourcing
Banks and Finance companies see outsourcing as inevitable
London, 15 May 2007 – A new survey of IT managers in financial service companies in Europe conducted by the data centre consultancy practice at BroadGroup, (www.datacentres.com) has revealed that pressures are mounting that will produce a significant escalation in third party outsourcing.
Based on in depth interviews with financial services institutions ranging from small banks to global investment companies, the report provides a detailed analysis of what data centre providers need to do to win business from European financial services companies.
The report, IT outsourcing to 3rd parties by financial service companies in
Among the wide range of factors that lie behind this emerging process, including new regulatory pressure and the belief that the impact of MiFID has been underestimated, is the recognition that data requirements will grow in the year ahead although this is often linked to the highly specific needs of the sector. As new trading algorithms and financial products become ever more complex, for example, then data needs also accelerate.
Power, cooling and lack of space are identified as the most critical and to the interviewees, apparently insoluble challenges to confront data centres. A majority of those interviewed considered data centre space and power as becoming more important again over the next 12 months. The report finds that many have concluded it is preferable to bypass the problem and outsource and identifies the key criteria that will influence their decision.
The interviewees were sceptical about the capability of vendors to solve power and cooling challenges and suspicion of those who placed too much emphasis on their green credentials. Virtualization is often perceived as demanding greater power and cooling, to the extent that several interviewees have actively considered moving back to mainframes which are much more efficient.
Opinion too of data centre providers – split into a number of categories in the report – was often negative ranging from a low level of understanding by telcos, to a surprising lack of awareness of managed service providers. Carrier neutral players fared more favourably. New potential alternatives such as Google were cited with interest by interviewees.
Concerned at a deep level with security, financial services companies would ultimately prefer to own and manage their own data centres. But as these businesses question whether data centres should be a core competence of the organisation, they generally retain a long term perspective, and European IT executives are preparing for what they perceive as an inevitable shift to outsourcing over the next two years.
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