BITS, the technology group for the Financial Services Roundtable, has endorsed industry guidelines for selecting and managing information technology (IT) service provider relationships.
The BITS Framework for Managing Technology Risk for Information Technology (IT) Service Provider Relationships establishes a framework that closely follows regulatory requirements and sets voluntary industry guidelines. These guidelines are critical in the current business environment, as the financial services industry increasingly relies on IT service providers and outsourcing to support the online delivery of financial services and core technology processes.
The worldwide market for outsourcing professional services will break the $1trillion mark within the next four years, according to GartnerGroup. The North American professional services market alone is expected to grow from $229 billion in 1999 to $539 billion in 2004. Narrowing the focus to financial services, Gartner reports that the total annual dollars spent on outsourcing of retail financial services has grown from $8 billion in 1998 to a projected $22 billion in 2002. The average annual growth rate for outsourcing retail financial services is projected at 27% for 1998 - 2002.
Outsourcing is defined as any circumstance where customer information or critical company data are outside the direct control of the financial services company. There are many tradeoffs an institution must consider when making decisions about outsourcing, including cost considerations, liabilities and efficiency issues. BITS launched this initiative to help financial services companies satisfy regulatory requirements as well as identify and mitigate the risks associated with outsourcing.
The BITS Framework for Managing Technology Risk for Information Technology (IT) Service Provider Relationships is the result of an intense industry effort that required the collaboration and cooperation of numerous representatives of the financial services industry, regulators and service providers. During the development process, the document was presented to a range of audiences and submitted for public comment. The resulting Framework covers most aspects of control, design and management practices for which IT services are under consideration for outsourcing or have been outsourced. The BITS Working Group was composed of financial services companies of all sizes, and included representatives from the American Bankers Association, America's Community Bankers, Credit Union National Association, and the Independent Community Bankers of America. Co-Chairs of the Working Group were Sharon O'Bryan, ABN AMRO, Jim Dempster, Metavante and Viveca Ware, Independent Community Bankers of America.
"Our customers rely on financial institutions to provide secure services whether they are provided by our companies or our outsourcing partners. As an industry, through BITS, we stepped up to establish a common understanding of our requirements," according to James H. Blanchard, chairman and CEO of Synovus Financial Corp. and chairman of the BITS Board of Directors.
BITS offers this Framework in the full spirit of the Federal Financial Institutions Examination Council (FFIEC) Guidance on Technology Outsourcing, which is characterized by the Council as intended for consideration in conjunction with an organization's overall risk management program, rather than as a prescriptive measure. The BITS Framework for Managing Technology Risk for Information Technology (IT) Service Provider Relationships can be obtained at https:// www.bitsinfo.org.