The concept of outsourcing is often associated with systems and computer companies like International Business Machines Corp. and EDS Corp.

But outsourcing can be effectively applied to more than just data-center operations.

Any function that is not part of a company's core business but that requires a large investment in personnel or equipment is a viable candidate.

Much to Choose From

Many technology-based services are available to financial institutions that want to improve their bottom lines through more efficient operations.

For example, a provider of telecommunications services can use existing facilities to offer cost-effective help for many types of business-to-consumer operations.

The applications of such "operational outsourcing" are many. Outsourcing of credit card services is one option for a bank wishing to downsize internal operations. New-account processing, customer-service support, statement production, and collection are among the credit functions that third-party processors have mastered.

Many service vendors already have the infrastructure - including skilled telephone service representatives and state-of-the-art systems and technology - to handle a variety of operations.

Fielding Customer Calls

Another excellent use of outsourcing is for servicing of calls from customers.

For example, phone lines can be set up to handle customer questions on such subjects as mortgage rates or checking accounts. These calls can be answered by people or by voice-response systems.

A third-party processor can also take orders generated by marketing campaigns or help customers deal with emergencies such as stolen travelers checks.

Administrative-support services like resolving billing questions, handling customer complaints, and making account adjustments are other effective applications.

Regardless of how operational outsourcing is used, the key consideration is quality service for your customer.

A processor's sophisticated hardware and software should enhance productivity for the bank while providing the same level of customer service as the previous in-house operation and preserving the bank's personality.

Financial institutions outsource their data-center operations to save the investment in training and equipment necessary to establish and maintain such large facilities. Banks can outsource teleservicing operations for the same reason.

The cost of third-party services is usually structured on an hourly rate or cost-per-call basis. This can be much less expensive for the bank than an in-house operations center, with its major fixed costs.

In-house centers also require sizable systems development budgets to maintain technological standards. These expenditures tie up capital that could be invested in the bank's core business.

So when thinking of outsourcing, think of any function that diverts attention and resources from the main business of the bank.

Then consider third-party processors. They can save you money while enhancing service quality.

Mr. Orlove is director of electronic services at Sears Payment Systems, Riverwoods, Ill.

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