As part of its ongoing effort to cut costs, Credit Suisse signed a deal today to outsource its entire voice and data network management infrastructure to BT and Swisscom. Under the $1.1 billion contract, 231 employees and 50 contractors will be transferred to BT. The contract has a minimum five-year term with the option of extending the term to seven years and encompasses Credit Suisse's enterprise and financial trading environments."This makes a lot of sense for Credit Suisse," says Mark Tauschek, Senior Research Analyst at Info-Tech Research Group. "Currently they've got 231 internal staff and 50 contractors managing that network and infrastructure, and that's not their core competency. If they can eliminate that organizational burden and have BT and Swisscom take care of it, that's a good thing for them. It's not uncommon for financial institutions to outsource at least components of their network and network management."
The cost savings Credit Suisse is hoping for will mostly likely come from lowered IT staff expenses. "You may see some downsizing," Tauschek notes. "BT and Swisscom have a lot of the needed skillsets internally, so it would be more economical for them to take over some roles within that new organization."
Info-Tech published an Impact Research study last week that found that businesses can achieve on average cost savings of 27% by outsourcing their IT infrastructure. However, many of the companies surveyed had outsourced work offshore to countries with cheap labor pools, like India. Application development in particular is increasingly taking place in India, Tauschek says.
One thing Credit Suisse will have to be careful of is the backlash some financial services firms have encountered to the outsourcing of IT management, even when it's onshore and people stay onsite and just get paid by the outsourcer. There can be culture clashes, differences in compensation and benefits and differences in the way people are treated that can lead to service and performance issues.