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The evolution of outsourcing in Wall Street IT

Bankers are flush with cash, but the drive to outsource proceeds
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Outsourcing isn't for reducing headcounts any longer. In fact, CIOs are relying on third-parties even when times are relatively good.

So says the men and women who are outsourcing more and more back- and middle-office functions inside today's Wall Street firms. According to Daniel Houlihan, senior VP and head of global fund services for North America at Northern Trust. "Outsourcing is a recession business, and you will always see spikes during downturns," but notes that, "the complexity of the business has firms looking at outsourcing for other reasons than just cost."

Newer regulations are a major driver for service providers. Form PF and new OTC derivatives rules are just two new regulations that often require potentially costly system changes.

"The volume and impact of regulatory changes is one of the key drivers that motivates asset managers to consider outsourcing some of the functions that they may have originally intended to retain in-house," says Christian Bolanos, senior VP and global head of the outsourcing discipline at Brown Brothers Harriman.

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