Banks say ‘Yes’ to complete outsourcing

The banking sector seems to have finally opened up to the idea of 'complete outsourcing' if Yes Bank Ltd's seven year outsourcing deal with Wipro Infotech is anything to go by. This is a good case to evaluate how effective a build, own, and operate model can be in the Indian banking environment.

According to the deal, the bank's entire technology requirements for its offices, branches across India and the data centre have been outsourced to Wipro Infotech on a build, own and operate basis. "This will include implementing core infrastructure and hardware, branch roll-outs, networking, data centre management, and back-up support for disaster recovery," says H Srikrishnan, Executive Director, YES Bank Limited

The `pay-per-use' model under which outsourcing has been done will come into effect after a 'transition' period of one month and extend over seven years. The bank expects this approach to address and scale up all technological requirements as it expands its product rollout in the retail and corporate segments. Legacy systems will be replaced with the state-of-art technology after the expiry of a pre-determined 'refresh' period. ATM infrastructure rollout and management is not part of the deal.

Flexcube is the bank's core banking system for retail and corporate operations. The application implementation for the first set of branches will be done by i-flex and implementation for future branches will be done in-house. "Wipro Infotech shall carry the first level support (L1) of the Flexcube application for all our users and shall help deploy Flexcube across our branches," says Srikrishnan.

The bank is colocating at Reliance DAKC, and Wipro will be responsible for the management of data centre operations, which includes 24x7 online support and related data centre activities. According to the bank, stringent Service Level Agreements (SLA) are in place. "This will ensure a minimum uptime of about 99 per cent, depending on the criticality of our requirements. In some cases it goes up as high as 99.6 percent while in other cases it might be lower," Srikrishnan said.

Yes Bank Ltd declined to comment on the investments made. However, as per Srikrishnan, the bank will achieve significant cost savings from this deal. "We see a definite 30 percent saving over the next seven years as compared to doing this internally," said Srikrishnan.

While the bank's IT investments are minimal, only time will show how effective completely outsourcing a bank's IT operations will be. To a great extent, the deal's success will depend on how soundly the SLAs have been crafted and how effective Wipro Infotech will be in conforming to them.

- Anil Patrick R