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Why Bank of America banks on BPO
Dean Foust, BusinessWeek | January 26, 2006
For Bank of America, the decision to begin offshoring was, to borrow from the old adage, about time, not money.
Granted, the Charlotte (NC)-based banking giant did realize significant cost savings by shifting hundreds of technology and analytical jobs to India, Singapore, and China. Bank execs estimate that they've saved roughly $100 million since 2001 by offshoring some work that was previously performed in the US and Britain.
But just as important was the dramatic savings in time that BofA realized when it developed new products and services. Indeed, when Barbara J. Desoer became the bank's chief technology, service, and fulfillment executive in 2001, the biggest complaint she heard from the myriad departments her technology team supported was that the IT staff "takes too long, costs too much, and [was] not on schedule enough."
But by shifting some programming work offshore, BofA was able to convert itself into a 24-hour company. Programmers in California could hand off work overnight to colleagues in India, who handed it back off the next morning.
Other moves benefited the bank's commercial lending officers and investment bankers, who instead of assigning junior analysts with the task of compiling so-called "pitch books" -- the documents filled with all the data and analysis they need to make business presentations to prospective clients -- they now make the requests of their new colleagues in India.
Analysts in India work all night to prepare the pitch books for the bankers, who find the materials waiting in their e-mail the next morning -- a good 24 hours before it would have arrived the old way. "The 24-hour clock was a big advantage from the start," says Desoer.
Beyond the cost and time savings, BofA says it has also seen an improvement in the quality of some programming work, particularly for programs written in older computing code. That's a big issue given that some of BofA's mainframe computers run on old COBOL code that was written as far back as the 1960s and 1970s.
"We've got a lot of old programming languages where it's hard to find" knowledgeable IT workers, Desoer says. "U.S. college grads aren't interested in COBOL training. [But] some of these [India-based] companies have whole segments that have experience in these old programming codes."
Admittedly, the move offshore wasn't always seamless. At its Concord (Calif.) technology center, employees were up in arms over the abrupt style in which BofA first began shifting some programming work to India and elsewhere.
Morale plummeted when some BofA tech workers who were losing their jobs in the outsourcing process were, as their final assignment before being let go, instructed to train their Indian replacements.
Desoer acknowledges that those early experiences prompted BofA to rethink how it handled similar transitions after that. "It caused us to make a greater commitment to [retraining] our associates," she says now. "It caused us to make a larger commitment to explaining the context of changes happening in the marketplace in advance of [changes] happening. These programs are much more robust than they were five years ago," she adds.
Desoer notes that BofA now gives its technology staffers about six to eight months' notice before initiating any downsizing such as those that occur as a result of offshoring. That gives its employees enough time to potentially be retrained for a new assignment or to begin their search for a new position with a different company.
As BofA has grown more comfortable with the process of offshoring, it has begun to shift more and more "commodity" tasks around the globe. Some treasury functions such as reconciling small discrepancies in corporate accounts have been shifted from London to India.
The bank has also relocated a "letter of credit" processing facility from Hong Kong to China. And BofA is currently looking at offshoring some call-center work to Mexico, where it hopes to handle calls from Spanish-speaking customers in the U.S.
At the same time, Desoer says there are many tasks the bank will never consider outsourcing -- namely, anything where BofA believes it has a competitive edge. That way, it ensures that a third party doesn't misappropriate any of the bank's proprietary processes or share them with another client bank.
"We ask ourselves, 'Is there a core competency where we wouldn't want our Infosys team to learn what we're doing?' We're very careful what we send to third parties," she says. "We're not going to give people access to something that is proprietary or differentiating."
Inasmuch as offshoring has paid dividends for BofA, Desoer points out that it isn't for every company. She notes that offshoring came easy to BofA, given its legacy. The bank was effectively stitched together through the acquisitions of dozens of regional banks over the decades, with the result that BofA has long had a history of decentralized operations.
For instance, it maintains significant lending businesses in South America that it inherited through its acquisition of FleetBoston Financial, an asset-management unit in St. Louis that came with its takeover of Boatman's Bancshares, as well as sizable investment-banking operations in San Francisco that it gained through its purchase of Montgomery Securities.
"We're very used to working remotely, because we're a legacy of so many mergers," says Desoer. "So that was less of a problem for us. India was just part of the evolution of how we did business domestically." But Desoer cautions that companies with no history of remote operations should think long and hard before offshoring.
Companies should ask: "'Do you really know how to manage remote resources?' If the answer is no -- if I haven't managed from, say, Charlotte to San Francisco -- how do I think I'm going to manage from Charlotte to India?" Desoer says.
Desoer also advises companies to really ask themselves why they're offshoring. "What is it you want to achieve? If it's just cost savings, well, labor arbitrage is a fleeting thing -- eventually it goes away."
Desoer coaches any executive who's thinking about offshoring to not just dictate orders to their partners, but to listen and learn. "There's a lot that we've learned from our vendors that we've been able to bring back to the U.S.," she says.
A case in point: At the center in India where workers handle e-mailed questions from BofA customers using the bank's online banking service, managers there lock up all the notes and work papers of every customer-service rep each night, to avoid the risk that night janitors could come along and filch the account information for one BofA's customers in another country.
As a result, BofA has since instituted even more stringent security measures at its call centers in other countries as well.