www.microlinks.org/sc/outsourcing
September 16-18,  2008

Introduction to this discussion:  
Outsourced core banking systems could increase the efficiency and capacity of microfinance institutions (MFIs). MFIs, however, have been slow in adopting the use of outsourced core banking systems. They are concerned about finding a system that works for their unique situation, fear losing control over sensitive client data, and worry about security risks. Moreover, they are not convinced outsourcing will lead to reduced costs.

In the US, however, experiences suggest that outsourcing could be a successful operational strategy for financial institutions. A recent study, designed to relate experiences from small US banks, vendors, and consultants to MFIs in developing countries, found that US small banks use outsourcing to reduce their IT staffing and infrastructure costs and that outsourcing levels the playing field against larger banks.

• Day 1 (September 16) – Outsourcing: Benefits and Decision Criteria. This day introduced and defined outsourcing and discuss its potential benefits and the decision criteria involved. Why would you outsource your core banking system? What is the Total Cost of Ownership (TCO) of outsourcing compared to hosting a core banking system in-house? Is outsourcing right for everyone? How do you select a core banking system? Panelists: James Godish and Paul Meyer.
  
  
• Day 2 (September 17) – Core Banking System Experiences from the Field. This second day focused on lessons learned from core banking system implementations in the field. We look forward to hearing from MFIs who have considered or have implemented a core banking system and chose to either build a system from scratch, buy a software package and host in-house, or outsourced their core banking system.  Why did you take the approach you did? How long did it take to implement and are you satisfied with the solution?  What would you do differently if you could do it over again?  We'd also like to hear from the providers of these banking solutions.
  Panelists: CGAP, Judy Payne, and Daryl Skoog..
  
  
• Day 3 (September 18) – Enabling Environment.  The enabling environment – including rule of law, regulations and oversight, infrastructure, market competition and the availability of markets – is different in the US than in other countries. What are the laws and regulations in developing countries related to IT risk management, data privacy, and the location of data and transaction processing? Is a lack of regulation, or over-regulation, inhibiting outsourced IT services? Do the court systems enforce contracts and service level agreements? Is the state of IT infrastructure – reliable and stable network connectivity and power – improving and less of a barrier to use of technology? And can vendors provide MFIs with outsourced solutions including the full suite of managed services?
  Panelists: CGAP, Sandeep Chatterjee, and Steve Sellers.