Bank of Queensland squeezes outsourcers

Bank of Queensland said yesterday that it has put its outsourcing relationships under the microscope as the second phase of its cost cutting drive.
Written by Suzanne Tindal, Contributor

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 costs.

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.

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