A Business Case for Un-Outsourcing

Not every company that’s outsourced IT stays married to the idea. Sometimes, the reason for outsourcing can no longer be justified, sometimes the outsourced job has run its course, and sometimes the deal stopped working so well, or even worse, went bad. Sometimes business models change, economies tighten or grow, and divisions are bought and sold. Things change, and the outsourcing contract no longer accommodates that change.

For First Tennesse Bank, outsourcing its IT infrastructure was no longer cost effective, nor does it meet the high bar it’s set for serving customers. First Tennessee Bank provides financial services through more than 180 First Tennessee bank locations in and around Tennessee and 18 FTN Financial Group offices in the U.S. and abroad. In fact, in a press release issued earlier this month, the executive VP and CIO Bruce Livesay said, “”The desire to serve our customers better than any other bank is what’s driving us to bring our technology management back inside the company,” adding that the change will enable the bank to “more quickly and efficiently respond to our customers’ needs and the changes that are required of banks that want to compete in today’s dynamic marketplace.” 

In addition, the outsourcing gig could not be molded to meet the current and future needs of the bank.

The press release gives few details, but in an article here in Bank Systems & Technology, the bank is terminating an outsourcing agreement with a “major core banking services provider.” Livesay was interviewed for the article, and in it he explains that the bank decided to un-outsource because of a major change to its overall business, namely the sale of its mortgage company, First Horizon Home Loans, to MetLife in 2008.

Once that business was gone, the bank didn’t need such a big outsourcing contract, and according to Livesay, the services couldn’t easily be scaled back. The bank also has big plans for its IT operations, and according to the Bank Systems & Technology article, is one-third the way through a three-year IT overall that includes upgrades to core systems in all the branch offices, new applications that leverage Web services for easier integration and for allowing them to run on mobile devices.

The end of its outsourcing arrangement means the bank’s putting a “help wanted” sign out. The decision to un-outsource its IT operations means 65 IT jobs will be brought in-house. It is also building a new data center in Maryville, Tenn.The data center will house the bank’s computer technology infrastructure, including all servers and its mainframe.

Once the new data center is complete, the new employees as well as other IT employees from nearby locations will all work there. At full capacity, the data center will have 100 employees working there. The bank also said in its press release that six new IT positions will be added in 2012 to its headquarters in Memphis.