Technology outsourcing : a community bank perspective

This article provides an overview of the technology industry that has evolved to provide technology outsourcing services for community banks, and the risk management issues associated with outsourcing. The service provider industry is in a transition phase being brought about by changing economic fundamentals in banking and in information technology. These factors have contributed to significant consolidation among the technology companies that serve the banking industry, especially among technology firms offering core processing services. Accordingly, the array of firms serving the national and regional markets has changed significantly. The increasing reliance of banks on technology service providers to support core bank processes has led to heightened attention on the risks of new technologies. Awareness of the growing importance of these risks has led to development of a standardized framework for managing the risks related to technology outsourcing. Survey results that point to practices most widely followed by community banks are used to highlight current practices and regulatory guidance for managing technology risks.