In this brave new world, many industries are seeing the old, established order changing. The business of outsourcing in the financial sector is not immune to these changes but it still seems to be making good progress on the path to maturity. Long gone are the days when the lowest headline day rate was the most important part of any deal. Today the buzzword is knowledge: sharing and retaining it within the business being the goal.

In the financial sector, institutions and their external service providers have reached a new level of collaboration. GFT UK recently asked 32 large, international enterprises from across Europe what they thought about the future of the outsourcing model and the trends they are experiencing in the sector. They cited the importance of knowledge transfer as a benefit of working with an external service provider, and indicated that they expected outsourcing needs to rise during the coming months.

Despite economic circumstances, it seems that businesses recognise the continuing importance of investment in IT. More than one-quarter (26%, the largest single response)

of respondents cited the transfer of knowledge back into the business as one of the greatest benefits of working with external service providers. While costs are obviously still a significant factor, businesses are increasingly looking at the knowledge gains to be had from a properly collaborative process.

Turnover and out

In the UK, this is an issue that GFT has already faced. One client, a large UK bank, had experienced a high level of staff churn, the result of an acquisition. This created a risk for the bank that needed to be mitigated: the majority of the knowledge about the project, the solutions and outcomes were all held within GFT, the external service provider. In order to mitigate this, a knowledge transfer programme was initiated by creating an integrated project team. So gradually, through the daily sharing of information during business-as-normal activities, the knowledge was transferred back into the bank.

Besides knowledge transfer, the research also revealed a – perhaps unexpected – trend: the predicted rise in outsourcing requirements in the coming year. More than three-quarters of respondents foresaw a need for external support in the strategy and process consulting sectors (87% and 80% respectively) and nearly two-thirds (59%) expected demand for IT strategy consulting to increase. In addition, almost half of them anticipate an expansion in the use of managed services models in terms of infrastructure operations (47%) and business process outsourcing (42%).

Given this new trend and predicted rise, how can international businesses get the best from their external service providers and ensure that the knowledge gleaned from the service is retained by the business? The answer is: it is not easy! This new phase of outsourcing demands collaboration and flexibility. Successful knowledge transfer involves three main considerations:

• It is a two-way street. Transfer of knowledge goes both ways and is an ongoing process.
• It has to be flexible. The external service provider must be able to accommodate changes within the agreed scope and contract. Both client and provider must allow the service to address areas that may not have been in the original plan.
• It needs commitment – to the previous two points and also to developing and maintaining the client/provider relationship, making it easier for both parties to be flexible.

Holistic approach

Every project and instance of knowledge transfer is going to be different. It is about responding to the business as a whole and not just applying the technology.

Learning from its experience with the UK bank, GFT has been able to minimise the complexities of knowledge transfer in this long-term outsourcing service with a major international bank. Here, it has been a key part of the programme from the outset.

The programme began as a user acceptance testing (UAT) service. However, there was little documentation against which to test, as well as a lack of process and structure. Having discussed the importance of knowledge transfer in advance, GFT already had extensive access to the right people and knowledge within the business so, sitting alongside the client team, it was able to share and refine knowledge during the programme.

Asking around

Classic analyst questions were asked, such as “why do you do it like that?” and replies were reviewed and responded to in a formal and structured way, providing knowledge on industry best practices and improving the business structures in the process. This allowed for not only testing and improving the UAT and passing back GFT’s knowledge, but also allowed for improving other processes such as reporting and analysis of financial instruments. The programme is now also changing the data reporting and improving governance at the bank.

Knowledge transfer therefore ensures that the client’s business is improved and reinvigorated through the experience of working with an external service provider, and continues to be so. The challenge for the client is to allow access to the company’s knowledge from the outset and for the provider to have a solid understanding of the industry processes and systems, as well as the technology.

In this climate, it is hard to put a price on knowledge transfer, but according to the recent research, demand for it is clearly set to continue. Outsourcing has moved beyond the basic near/offshore dynamic and into a period of reciprocal, collaborative relationships.

Even in these straitened times, sensible businesses know they cannot shirk investment in IT for long. But they can and should demand more; bringing the knowledge and skills of the external service provider into the business and generating a competitive advantage. It is about a partnership, an interwoven relationship, which ensures the right information gets to the right people at the right time.

Graham Underwood is managing director of GFT UK Ltd.

PRACTICAL TIPS

MANAGING KNOWLEDGE TRANSFER

On behalf of GFT Technologies, the market research institute Lünendonk surveyed 32 large enterprises that work with external IT service providers, asking them about their experiences and plans in connection with the placement, control, and staffing of IT projects. The results revealed that only an IT service provider with solid understanding of industry processes can create added value for its customers.

All companies surveyed were positioned at an international level with extensive sourcing experience. Two-thirds of the companies had more than 5000 employees, 40% had an IT budget of more than €100m in 2008, 40% were in industry, and 60% in the service sector.

The results of the survey point to five key tips for managing knowledge transfer in outsourcing arrangements:

• Raise the idea at the very beginning;
• Encourage openness and be prepared to share throughout the outsourcing service;
• Be flexible in terms of needs and findings;
• Identify the people,who hold the knowledge or need to retain new information; and
• Commit to knowledge transfer as a daily means of sharing of information.