Financial Institutions Tap into New Model of Service Delivery to
Boost Efficiency and Reduce Costs
New Study from Booz Allen Identifies Benefits and Obstacles to
``Process Utilities'' – the Next Generation
of Shared Services
NEW YORK (Business Wire EON/PRWEB ) March 25, 2008 --
Financial institutions struggling to manage costs are turning to a new
model of service delivery, focused on customer-facing activities such as
opening accounts and billing statements, to achieve savings and
operating efficiencies, finds a new study by the Economist
Intelligence Unit, sponsored by the management consulting firm Booz
Allen Hamilton.
More than a third of the cost-reduction efforts launched by financial
institutions in the past three years have failed to reach their goals,
according to the study. As a result, an increasing number of companies
are turning to the next generation of shared services called “Process
Utilities.” Unlike efforts that have delivered
savings by scaling internal services -- finance, accounting, human
resources -- process utilities pull together core activities for the
delivery of products and services such as opening accounts and billing
statements.
Building process utilities requires executives to look across business
lines, functional silos and geographic divides to identify the processes
that can be shared across typical corporate boundaries. “Account
opening,” cited by 47 percent of those
respondents who have adopted process utilities, is the most popular
business process that has been structured as process utility. “Billing/statements”
and “Clearing” are
also common choices, selected by 37 percent and 35 percent of
respondents, respectively. Of processes yet to be converted,
approximately one third of those surveyed say that turning “IT
infrastructure” and “IT
application development” into process
utilities is at the top of their planning lists.
More than half of the financial institutions that have implemented
process utilities reported “improved
economies of scale,” and nearly four in 10
said “increased customer satisfaction”
followed deployment.
Despite the reports of higher efficiencies and reduced costs, the survey
found that financial institutions seeking to use this new operating
model face a range of cultural, technological and organizational
challenges. More than 38% of respondents cited “variation
in customer needs” as a significant hurdle,
and approximately one third cited “complex
product offerings” as a barrier. Over a
quarter stated that “multichannel management
was an obstacle to success.
“Finding new efficiencies and delivering on
promises of synergy is top of mind for financial executives from New
York to London,” said J. Scott Cade,
Principal at Booz Allen. “Process utilities
are a proven path to boost efficiencies, cut costs and even deliver
better customer service. This next generation of shared services is
slated to become a key way for financial institutions to achieve their
business goals.”
Other key findings from the study include:
-
Cost-cutting track record – Of the
334 banks that tried to achieve savings of five percent or more over
the past three years, 35 percent failed to reach their goals. The
average shortfall in savings was approximately nine percent. A “failure
to align objectives to broader business goals”
was cited by 36 percent of respondents as a reason for coming up
short, while 32 percent attributed it to a “failure
to provide incentives.”
-
Most valuable techniques – Among the
most successful strategies these executives have used to cut costs in
the past, the top three were “business
process engineering” (61 percent), “outsourcing”
(45 percent), and “shared services”
(35 percent).
-
Familiarity with process utilities –
Seven in ten of the executives surveyed say they are familiar with the
concept of process utilities, and nearly a third state that process
utilities have been important to their cost-cutting efforts over the
past three years. When asked about the likelihood of their
implementing the concept across their business lines in the future, 37
percent say they’re likely to do so.
Indeed, 64 percent believe process utilities will be important to
their future cost-cutting efforts.
-
Size and type of financial institution –
Of banks with more than US$1 trillion in assets, 26 percent say they
are very likely to implement process utilities. For banks with less
than US$50 million in assets, that number dropped to 14 percent. Three
quarters of credit card companies and 46 percent of diversified
banking institutions stated that they are likely to implement process
utilities.
Study Methodology
In July of 2007, the Economist Intelligence Unit conducted a global
survey, sponsored by Booz Allen Hamilton, of 499 financial-services
professionals on the subject of process utilities. Approximately
one-third of respondents were C-level officers in their organizations,
with 12 percent serving as CEOs. The balance represents heads of
business lines, VPs, department heads or other professionals. Within the
financial services industry, executives reported working in the areas of
retail universal banking, wealth management, investment banking and
corporate banking. The average respondent’s
bank held assets of approximately US$240 billion. Approximately 30
percent of the executives came from small banks with assets less than
US$10 billion, and a fifth reported assets greater than US$500 billion.
The survey’s full findings and methodology
can be found at www.boozallen.com/process_utilities.
About Booz Allen Hamilton
Booz Allen Hamilton has been at the forefront of management consulting
for businesses and governments for more than 90 years. Providing
consulting services in strategy, operations, organization and change,
and information technology, Booz Allen is the one firm that helps
clients solve their toughest problems, working by their side to help
them achieve their missions. Booz Allen is committed to delivering
results that endure.
With 19,000 employees on six continents, the firm generates annual sales
of $4 billion. Booz Allen has been recognized as a consultant and an
employer of choice. In 2008, for the fourth consecutive year, Fortune
magazine named Booz Allen one of “The 100
Best Companies to Work For,” and for the past
nine years, Working Mother has ranked the firm among its “100
Best Companies for Working Mothers.”
To learn more about the firm, visit the Booz Allen Web site at www.boozallen.com.
To learn more about the best ideas in business, visit www.strategy-business.com,
the Web site for strategy+business, a quarterly journal sponsored
by Booz Allen.
About the Economist Intelligence Unit
The Economist Intelligence Unit is the world leader in global business
intelligence. It is the business–to–business
arm of The Economist Group, which publishes The Economist
newspaper. The Economist Intelligence Unit provides geopolitical,
economic and business analysis on more than 200 countries, as well as
strategic intelligence on key industries and management practices. With
over 300 full–time professionals in 40
offices around the world, supported by a global network of more than 700
contributing analysts, the Economist Intelligence Unit is widely known
for its unparalleled coverage of major and emerging markets. More
information about the Economist Intelligence Unit can be found at www.eiu.com.
See the original story at: http://eon.businesswire.com/releases/booz_allen/process/prweb800504.htm
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