OUTSOURCING: Big Banks Joining The Growing Move To 3d-Party Vendors

Since outsourcing's popularity has been growing in recent years, it comes as little surprise that bank spending on third-party computer services increased 3.2% in 1996.

What may surprise some, though, is that large banks - those with more than $4 billion of assets - led the pack in outsourcing spending growth.

As recently as the early 1990s, many in this group shunned outsourcing, considering it an abdication of control or a sign of weakness.

However, the merger craze and the increasing pressure to diversify delivery channels have combined to change many banks' minds.

Outsourcing helps large banks absorb the operations of acquired institutions in the short term and frees them to focus on developing technology strategies for the longer term, experts said.

The rise in big-bank outsourcing also has been fueled by vendor response to lackluster demand for their services a few years ago.

Instead of pushing for blockbuster contracts in which they manage huge chunks of a bank's operations, many vendors now sell more tailored services, enabling banks to farm out selected pieces of their computer operations.