A benchmarking study points to the need for an expansive view of IT-infrastructure management.
McKinsey’s benchmarking study of 41 banks worldwide suggests there is no silver bullet when it comes to efficiently managing IT infrastructure.
Traditionally, spending on information technologies has been higher for banks than for companies in other industries.
The typical bank faces fluctuating demand for computing resources, as well as increasing calls for IT and business managers’ time and attention. Outsourcing some infrastructure-management tasks can help banks optimize their use of internal resources, but it won’t necessarily help them reduce infrastructure-management costs in the long term.
A McKinsey team measured the correlation between banks’ spending on IT infrastructure, expressed as a percentage of their total operating income, and the degree to which they outsourced tasks associated with IT-infrastructure management—help-desk operations and server maintenance, for instance. The latter was calculated by comparing how much the banks spent on external services with how much they spent on IT infrastructure overall. There was no meaningful correlation between these two variables (exhibit). That is, the cost to banks that outsource a high share of IT infrastructure services was not demonstrably lower than the cost to banks that don’t outsource. Indeed, neither the banks with the highest overall spending on IT infrastructure nor those with the lowest outsourced any of their IT operations and activities.
The findings suggest that outsourcing is no panacea for curbing infrastructure costs. IT organizations in banks must instead take a broader view of their internal capabilities, as well as the potential benefits they may gain from external partners. To what degree will the provider relationship allow the IT organization to free up scarce human resources? What types of specialized expertise might the IT organization access through the provider?
Banking IT leaders who ask themselves these kinds of questions when devising their outsourcing strategies stand a better chance of building and managing IT infrastructure that can withstand market disruption and create lasting economic value for their companies.
About the author(s)
Author: Matthias Hoene is a partner with McKinsey Horizon360, based in McKinsey’s Munich office.