IT outsourcing in banks

2024: Law on IT outsourcing in banks in Russia will increase the costs of IT companies

In early February 2024, the Russian Association of Electronic Communications (RAEK), ARPP "Domestic Software" and the Association of Computer and Information Technology Enterprises (APKIT) sent a letter to the head of the State Duma Committee on the Financial Market Anatoly Aksakov, in which they warned of a significant increase in IT companies' expenses due to a bill that would allow banks to outsource the development of digital solutions and store data with banking secrecy in cloud services.

We are talking about a bill that was submitted to the State Duma in July 2023 by a group of deputies led by Aksakov and several senators. The authors of the document propose to empower the Central Bank of the Russian Federation to establish mandatory requirements both for the procedure for attracting service providers to provide IT services in these forms, and directly to their information systems. By February 2024, the bill passed the first reading in the State Duma.

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As Vedomosti writes with reference to a letter from RAEK, ARPP and APKIT, this bill could "significantly increase the costs" of small and medium-sized IT companies and "undermine competition in the market in favor of large players." According to the authors of the appeal, the initiative imposes on all IT companies the obligation to obtain a license from the Federal Service for Technical and Export Control of Russia (FSTEC), regardless of the fact that bank secrecy was transferred to them. As a result, the IT-Business will bear additional costs (obtaining such a license will cost 1.5-2 million rubles). New information security requirements can cost each company 15 million rubles a year, they sent letters. In addition, according to them, in case of violation of the requirements specified in the bill, the company may freeze the license for up to 90 days with the confiscation of the "manufactured product and means of production."^[1]

2012: IT employees of financial companies look with concern at the development of outsourcing in the banking sector

IT employees of financial companies are wary of development outsourcing in the banking sector. This is evidenced by the data of the InformationWeek study, which was attended by 1359 IT specialists employed in US organizations financial sector. They were asked to answer the question of the consequences of using outsourcing in the company. The majority of respondents noted exclusively negative trends. More than half of ordinary employees reported that the appeal to outsourcing leads to a reduction in offers in the labor market (66%) and reduces the motivation of employees (58%). These same factors raise concerns of IT management, although the degree of skepticism among them is lower (55% and 46%, respectively).

Among the other consequences that the respondents highlight are lower rates for new employees (43% of ordinary IT specialists, 36% of managers), fewer opportunities for career growth (36% and 32%), salary cuts (22% and 18%), underestimated employee skills (30% and 28%). By comparison, the proportion of those who believe that staff estimates in outsourcing are growing is much less (13% and 16%).

What impact does outsourcing have on IT professionals? (orange column - responses of ordinary employees, red - IT managers)

Source: InformationWeek, 2012

Positive shifts in the transition to outsourcing were at the tail of the table, a minority of optimistic employees turned out to be. At the same time, it is obvious that managers are more loyal to outward IT - managers less often mention negative trends and more often name positive points.

Speaking about the benefits of outsourcing, respondents most often note the possibility of working on more innovative projects, since manual work is withdrawn from the company (this is the opinion of 19% of ordinary employees and 24% of IT managers). A number of respondents noted that the use of outsourcing contributes to business growth (13% and 19%). In addition, there were those who claim that the use of external services contributes to the creation of new jobs in order to support the efforts of the outsourcer (10% and 15%).

How has outsourcing affected your career? (orange column - responses of ordinary employees, red - IT managers)

At the same time, these studies suggest that problems exist more in the heads of employees, since 66% of ordinary employees and 65% of managers claim that the use of outsourcing did not affect their careers at all. If the transformations do affect workers, then most often this concerns a change in the range of responsibilities. The number of those who lost their jobs turned out to be small (6% and 3%), but it should be remembered that the survey was conducted among existing employees of companies, and specialists who were dismissed and could not find a new place of work could not take part in it. At the same time, 66% of respondents replied that their company resorted to outsourcing services.

The popularity of this approach to IT organization is due to the fact that the savings on the use of services of an external provider outweigh the risks associated with a possible data breach, failures in the provision of services. About them, in particular, warns the Federal Financial Institution Examination Council (FFIEC), whose representatives are wary of the possibility of using autorcing.

Does your company use outsourcing services?

Russian financial institutions, unlike their American counterparts, are more conservative and prefer to rely on the capabilities of their own IT departments. Exceptions include several small banks that have completely outsourced IT (for example, Starbank or Expobank).

• Source: CNews

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