A New Forum on Outsourcing

With more banks weighing the option of farming out data processing to outside companies, organizations are poping up to help banks better understand the dynamics of such deals.

Huntington Bancshares Inc. and Bisys Inc., a computer services vendor, recently formed one such group, called the Bank Outsourcing Alliance. The alliance is a forum for bankers to exchange views and information about turning over technology operations to third parties, which is known as outsourcing.

Now, a Los Angeles-based consulting firm and the former head of technology at Merrill Lynch and Security Pacific Corp. have teamed up to form an outsourcing information and evaluation service.

Membership Plan Differs

Unlike the Huntington forum, the Vendor Partnership and Outsourcing Interests Group is open to companies in all industries but does not accept vendors as members.

The Huntington group has three vendor members - Bisys, M&I Data Services, and Digital Equipment Corp. - and plans to add a few more.

The new group is sponsored by Key Consulting Group Inc., Sherman Oaks, Calif., and DuWayne Peterson Associates, named for its principal, a high-profile technology executive who recently retired as chief information officer at Merrill Lynch & Co.

"Most companies have a hard time dealing with how to use outside firms for things like data processing because they haven't done it before," said Mr. Peterson, who before his stint at Merrill Lynch was technology chief at Security Pacific.

"They are also uneasy about getting too close to their vendors because they're afraid of losing the lever they have as a customer, added Mr. Peterson. "The group is designed to help companies sort out these issues."

More Joint Ventures?

Mr. Peterson said he believes more banks are open to forming joint ventures with each other as well as with vendors for various processing functions because they are interested in cutting costs.

Partnership discussions among banks are already underway, and Mr. Peterson said he believes a few will be announced next year.

"The smaller banks saw that the only way to increase profits is to decrease costs, and one way of doing that is to band together with other entities," said Mr. Peterson. "Larger banks are warming up to the idea. It's a new movement, one of survival."

Helping Technology Execs

The group will assist technology executives in evaluating both joint venture partnerships with vendors and traditional outsourcing deals.

It will examine such issues as how to negotiate an outsourcing or partnership contract, how mergers affect outsourcing arrangements, how to return to in-house operations, and personnel considerations in outsourcing.

The group will also offer executives interaction with other companies that have outsourced, have formed partnerships with vendors, or are considering such options.

Gene Sheiniuk, chairman of Key Consulting, said the group is open to companies that have signed outsourcing agreements as well as those that are considering doing so.

$15,000 a Year

Although vendors can't be members, they will be allowed to make presentations at the group's meetings.

A membership costs $15,000 a year; it will allow two executives from a company to attend two two-day meetings a year and give them access to an informational hot-line.

Members will also get four research papers a year on outsourcing issues.

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