Bank of Queensland (BoQ) said yesterday that it has started to put its outsourcing relationships under the microscope in the second phase of a cost-cutting drive.
"We've begun a major review of our outsourcing relationships,"
Bank of Queensland David Liddy said yesterday at the company's full
year results presentation for the year ended 31 August 2009. "We
view this as an enabler to better compliance and process efficiency
which will make our efficiency gains sustainable."
The bank set itself a goal last year of lowering its cost to
income ratio by 15 per cent from its then 60 per cent.
Bank of Queensland does rely on outsourcing to provide many of
its services as stated by chief financial officer Ram Kangatharan at the presentation.
"Our virtual model relies on scale players like EDS in our back
office and IT support with a fairly light touch head office
configuration," he said.
The bank has had a 10-year outsourcing deal with EDS, now known
as HP Enterprise services, since 2002. That deal
was extended in 2005 for another two years to 2014. The bank has also
just re-signed with Telstra for its telecommunications.
Any cost reductions that can be found in outsourcing relationships
will be added to those already gleaned in the
first phase of cost cutting which included a restructure of the
organisation. Chief information officer Jim Stabback had been tasked with finding around $50
million in annualised cost savings.
The first $20 million of the proposed $50 million in ongoing
savings had come from BoQ's recent restructure, which affected
technology staff, including senior managers. The remaining $30
million was expected to come from a reduction in discretionary
spending, rationalisation of suppliers, and reducing data storage
In its results yesterday, Liddy said the bank has brought its cost
to income ratio down to 49.9 per cent. IT costs account for $64.4 million
or 21 per cent of operating expenses.