China Software Outsourcing Company

Financial Outsourcing Services in China

09 April, 2010
Written by William Zhu
Beijing RayooTech Co., Ltd.

--Financial Outsourcing Services Market--

"Financial outsourcing services, is the financial institutions base on the sustainable operations development, using the outsourcing business (finance company subsidiaries within the Group entity or the entities outside the financial companies) to implement its own conduct of business."

                                                                                --- Basel Committee on Banking Supervision

Financial outsourcing services currently divided into ITO and BPO, that is, the business process outsourcing (BPO) and Information Technology Outsourcing (ITO), for example, consulting, software development, software implementation support and maintenance, issuing and acquiring services, data processing and disaster recovery and customer service, etc.

Deloitte & Touche survey demonstrates that there are 410 billion USD of financial services outsourcing to overseas institutions in the past five years in the USA, which occupied 15% of the total expenditure of financial outsourcing services.

However, the scale of China's financial outsourcing services market in 2009 is about 10 billion Yuan (not including product purchase). In the past three years, the financial outsourcing services, maintaining a compound growth rate of more than 30% in China market.

Thus, this area presents tremendous potential and business opportunities.

--The Currently Situation of Financial Outsourcing Services and the Future Development--

“Take the IT skills as the core competitiveness, to use the industry knowledge and project management capabilities to personalize the IT services, will become the trend of the financial outsourcing services”

                                                                                          ---Beijing Rayoo Tech. Company

The previous financial outsourcing services include the suppliers which list on the above figure. When the Software products supplier, hardware products supplier, systems integration supplier and consulting providers offer the software or hardware products, they provide outsourcing services at the same time. For example, Vanda Group provide the bank business system plus with offering the implementation outsourcing services and maintenance outsourcing services at the same time. When IBM provides apparatus, they also offer maintenance outsourcing services. The representative companies include IBM, HP, Lenovo, Chang Tian International Engineering Co., NanTian Group, etc. At this stage, the IT needs of the financial institutions can be satisfied through the standardized products.

The characteristics of these software outsourcing services are around with the software and hardware products, usually provide with the simple standardized services. Such kind of services can meet the needs of financial institutions at this stage.

With the development of the financial industry and the maturity of information technology, financial services and IT needs demonstrate the following trends:

1)Bank, insurance, securities-based financial institutions pay more attention on the core financial business innovation, unique and personalized financial business services are the competitiveness of the financial institutions.

2)The core financial business and non-core businesses, the front and back office operations, the standard operating procedures and non-standard operational procedures, which are separated fast.

3)Financial institution is to strengthen customer relationship management and carry out the customer-focused business philosophy, the speed and quality of customer service become more important.

4)The standardized software products is no longer occupied the dominant position of financial institutions, financial institutions began develop a large number of customized business systems and projects to meet the needs of business innovation. These include: the core business systems, E-channel platform, intermediate business platform and E-commerce.

5)Efficiency improvement, consolidate resources and reduce costs become a trend for the backstage construction of the financial institutions.

However, the current financial outsourcing services provider has no corresponding ability to provide such outsourcing services. Thus, the software development, technology research and business promotion of the four major state-owned commercial banks are outsourcing to Headquarters’ R&D centers at present. The major insurance companies have built their own insurance centers. As far as known, Citigroup, HSBC, Morgan Stanley and other world-class financial institutions have the teams to provide the support service at the backstage. Those teams aim to meet the individual needs of the financial institutions.

(Standardization requirements including consulting, technology, resources and business processing.)

(Individual requirements including hardware providing, integration services and software products offer.)

At present, the standardized demands of the software products, hardware products and integration products accounted for 40% of the financial institutions requirements, while the individual needs occupy 60% in total, which is rising rapidly. To meet this part of the demand, many financial IT products provider has launched a personalized IT services, such as LongTop Group, etc. RayooTech is the professional service provider that offers the personalized technology services.

There are several types of software service providers in this market:

Take the technology as the core service model:

The personalized service for Financial Institutions

In the future development, the service providers who can meet the personalized demands of the financial institutions will present the following competency models:

-Provide the low-cost human resources and infrastructure for financial institutions, and take them as the core competencies;

-Take the project management capability as the core competence, and able to help financial institutions to organize a certain amount of project team, under the leadership of the financial institutions themselves, the third parties technology vendors or the consulting firms to implement the delivery works;

-Take the technology as the core competence, integrated project management capabilities and financial industry knowledge, which to provide the personalized service to meet the changing demands. This kind of providers need to have strong technical skills, extensive industry background, consulting service capabilities, and able to participate in the standard development for financial services and IT services. This is the direction and goal for Beijing RayooTech as well.

--Domestic Financial Services Firms:--

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