- Analyze the events and consequences that led to the situation described in the bank sector and Credit Suisse Group in particular in the 90’s?
Answer: Credit Suisse was the leading financial services company in Zurich. It provided a variety of financial services to private small or medium sized customers. During the 90’s everything in the industry was running smoothly and so were banks. During that times cost to income ratios were very low. IT outsourcing was a much needed discipline due to the growing needs of the organization within and outside. Consequently banks did not realize how much additional costs they have incurred. When the bubble burst in 2001, interest rates, profit margins and assets began going down south. It was then the banks realized having made huge expenditure in IT much of which was unnecessary. Banks inefficient cost management was exposed badly.
- Which general problems with the old provider can you identify?
- The old provider had a high rate for catering to service level agreements.
- Risk management procedures to meet client needs were very costly.
- Price negotiation was done at the beginning of the contract. Then the costs seemed 20 percent lower than internal costs. But in current context it was higher than market rates.
- Quality of the service provided by the provider was not satisfactory.
- There was critical dependency of Credit Suisse on the provider.
- What are the advantages of Credit Suisse’s new supplier management / evaluation system?
Answer: The new supplier management / evaluation team had an experience in cutting costs. They completed 200 strategic sourcing initiatives reducing the costs by CHF 200 Million. The team could optimize the IT services sourcing, which had direct positive impact on the bottom-line.
Specifically to the IT sourcing assignments the team identified many the pain point of the current provider.
- As per the initial agreements with the provider, they charged on time and material basis, but it proved 30 percent costlier than industry average at a later stage.
- The team also figured out that the provider was witnessing volume declines in the SLA.
- Credit Suisse made up for 80 percent of the providers revenues otherwise the provider would go bankrupt.
- There was lack of transparency between credit and the provider which led to an inefficient and costly service.
- The provider had access to much critical data, which was not good for Credit Suisse’s business.
- The provider made complicated technical environment. There was absence of proper documentation which made Credit Suisse captive.
- If you were in position of Daniel Parker, which other preventive measures would you have to consider managing the transition process as smoothly as possible concerning the incumbent provider and your own supply management team?
Answer: Daniel did his best to manage the transition process smoothly. If I were him I would have taken a couple of measures like,
- I would have renegotiated with the incumbent provider for better services. Since the provider could go bankrupt without Credit Sussie’s business, it is possible that they made efforts to retain business. The provider could have reduced the prices, did proper documentation, and involved some internal team from Credit Sussie in that effort.
- A new hire into the provider’s team for knowledge transfer could have made the transition smoother.
- Write down the most important steps of IT-Provider-Switching management activities.
Three main steps to IT-Provider-Switching management activities are:
- Problem analysis – To identify requirements for end-user hardware services.
- RFP generation – Based on those requirements RFP was to be prepared for matching the exact requirements.
- Integration – Integration of new provider and phasing out of the old provider was to be carried out smoothly.
- Daniel’s team had to analyze the last two vendors across four categories. Which basic characteristic group of the potential providers are important to find the supplier that best matches the internal requirements of Credit Suisse Group?
- Potential suppliers with experience in handling outsourced banking IT activities.
- The provider should be cost effective for Credit Suisse.
- Supplier who can very well fulfill Credits Suisse’s SLA agreements.
- Supplier who could be transparent with Credit Suisse’s team and could do reporting as required.
- Daniel’s team had to implement the new service level agreement with the new provider. Try to describe the three key areas of managing the transition process.
- Designing interfaces to prevent data dependency and ease of accessing the information.
- Defining low priority services was a time buying attitude where the non-critical applications would be addressed later. Express services were launched to decide the priorities.
- Knowledge transfer to make most of the decisions to be made by the helpdesk and route the priorities accordingly.
- Which quantitative and qualitative results and benefits from the transition to the new provider can you identify?
- Cost effective transition.
- It will reduce the time to serve the demand put by end-users. Many trivial issues could be resolved on their own or by reading manuals provided with the hardware.
- It will reduce the need for highly qualified technician for small issues.
- Improved reporting and controlling system.
- Which important lessons have you learned from this case study?
- Always keep a check on the costs, be it good time or bad.
- Supplier’s credibility is very important. It is bad to do business with a financially dependent supplier.
- Setting up of an internal team to evaluate the performance of suppliers time to time is a great idea.
- Always keep the network and services provided by IT supplier documented to help the internal IT team as well as help in smooth transition.