BEYOND COST SAVINGS: HOW STRATEGIC OUTSOURCING IS TRANSFORMING BFSI

TRANSCRIPTION

HOST: Welcome back to the Power of Possibility, the podcast where we dive into the strategies that businesses are applying daily to drive growth, efficiency and innovation. And today we're focusing on a very important shift happening in the banking, financial services and insurance sector, which is the evolution of strategic outsourcing. And what used to be viewed only as a cost saving measure, has now become a key driver for innovation, compliance, operational efficiency, and enhanced customer experience. To explore this transformation, we have two experts’ guests with us today. We have here Ronak Doshi, he is partner at Everest Group. He's a thought leader in BFSI, specializing in business process services, digital transformation, and financial services strategies. 

He will share his insights on the latest trends shaping outsourcing decisions in financial institutions. Hi, Ronak. 

RONAK DOSHI: Thank you for having me. 

HOST: And we also have here Michael Neuberg. He's the head of the global service line of BFSI at SPS. He brings deep expertise in financial service operations, outsourcing strategy and ID driven transformation. He will walk us through real world examples of how strategic outsourcing is improving efficiency and customer experience for banks and financial institutions. Hi, Michael. I'm glad to have you back in the podcast. 

MICHAEL NEUBERG: Hi Miguel, it's always a pleasure and as well pleasure to have the honor jointly with Ronak today, so looking forward to it. 

HOST: Perfect. So, in this episode, we'll discuss how outsourcing is evolving beyond cost cutting, also the role of AI and automation and regulatory challenges. And also, a very important thing, which is what the future holds for outsourcing in BFSI. So, to start with the first question, I will ask a question to both of you, you can take the lead, which is how has the role of strategic outsourcing in BFSI evolved over the last decade? So maybe Ronak, would you like to go ahead? 

RONAK DOSHI: Yeah, sure, happy too. So, if you look at the evolution of outsourcing and financial services across banking, capital markets and insurance, the first wave was all about location and cost arbitrage. You were able to do certain activities in areas and locations where you were able to kind of get that cost advantage as you mentioned. And then it suddenly went into arbitrage: There's an arbitrage of talent, there's an arbitrage of technology and there's arbitrage of process understanding. And all of those combined are now getting much more strategic advantage to outsourcing.  

It is all across a) run the bank, b) change the bank, and c) manage the bank.  

So, we're talking about how to run the bank more efficiently. How do I make sure my products and experiences are delivered on time? We keep systems upkeep to a great level, so that's where we want to make sure the business is moving at the speed it should be.  

But then change is important, right? There are new digital technologies coming in. You want to talk about AI, data, cloud, computing technologies. How do we make sure we are infusing those in the processes that we run as banks becomes the second stage.  

And then manage, right? We want to make sure we are staying compliant. We are staying secure. We are staying resilient. And we need outsourcing support to do that. And that's where we've seen overall outsourcing has evolved from not just being about the run the business piece, which is more of the cost arbitrage and efficiency play, but also change, which is driven by all the digital technologies and manage, which is also about how do I drive better outcomes on the compliance and resiliency initiatives that these organizations need to run. 

MICHAEL NEUBERG: That's very interesting. I think I can add in what Ronak said. So, we see clearly the increase in outsourcing as a strategic lever for companies and banks. You can look, for example, to the data from the European Central Bank here in Europe, which is collecting an outsourcing registry. They started it in 2022, and their latest report was in February 24th. I'm expecting the next one to be released rather shortly. 

Looking at that report, they highlighted the clear increase as well of more than 20 % from 2022 to 2023. Mainly IT still, and I think that's what Ronak highlighted as well. 

Going to back office and admin services topic,  there's a clear push. And not only then to other locations, as well roughly 20 % have been ( or 22 % exactly) are going offered as well from non-EU and other countries according to the ECB report. So, I see that as a proof point too, about what is happening in the banking industry, and I see that as a strategic lever. 

“In Germany, it’s expected that by 2030, 30% of the employee population will retire. On top of that, with the rise of AI, the required skills are shifting. So, you need other skills, people need to transform. That is definitely driving the key decision-makers when it comes to outsourcing, the skill shortage, customer experience and digitization. So much more than costs.” - Michael Neuberg 

HOST: Can you summarize what could be the key trends of right now driving outsourcing decisions in financial institutions? 

RONAK DOSHI: So, as we look at the key trends, we do a key issue survey with our customers. So, we get almost 300 to 400 respondents who talked to us about the drivers of the outsourcing, how they look at budgets and their vision for the future. One of the things that we've seen is that if you look at the major drivers for outsourcing, it still stands as the first one the cost and efficiency, and it’s not going to go away. 

The second is access to technology and other capabilities that may not have access to at the right scale.  

The third is talent. There's a bit of a talent supply gap, which we have seen over the years, and It's getting better, but again, that becomes the third driver for it. 

The fourth is also about how I get global capabilities being infused and getting 24/7 round the clock upkeep of systems, of processes, of my customer channels and other things. So that becomes also another strategic driver of outsourcing and offshoring.  

So those are the major drivers at the business priorities level. But if I were to abstract one level further, as you asked, it's about the operating model shift of these organizations. If you look at what we were talking about as banks of the past were about, here we are looking at each of these as individual functions.  

I'm looking at contact centers, workplace, infrastructure, application development as individual functions and doing outsourcing for each of these and trying to be better at these individual functions.  

Now we are talking about the operating model being geared towards products that we are delivering, experiences that we are delivering or value streams that we are running and how do we make sure that these are driving the business results or OKRs, the Objectives and key results of the business that you're looking at.  

So how do I make sure my technological operations and the outsourcing that I'm doing around it is delivering on those outcomes for the products or experiences that we are delivering?  

So, regarding this operating model, which is more for product operating model, or as we call “value stream operating model” in insurance and capital markets, how are we driving alignment towards that? That is where we are seeing outsourcing evolving significantly. 

This pushes towards operating model design and shifts towards bringing the technologies to drive those outcomes. 

MICHAEL NEUBERG:  So, I think OutRAM is key. So, it's all about customer experience. That’s where we see a clear shift, and I see Ronak nodding, so that definitely confirms it’s changing. I’m not just looking at pure costs; it’s about driving what you mentioned, Ronak: focusing in value stream and the value proposition. So, it's about getting customer experience, gaining customer satisfaction and gaining growth by getting customers on board and changing the outcomes.  

So that's clearly what we see as well. A survey from the Handelsblatt Research Institute, conducted just last year, highlighted this too. So, the one major part besides cost is clearly digitization innovation. Also, as Ronak said, shortage of skilled workers and experts. I think that's clearly a huge issue.  

As you see, for example, in Germany, it’s expected that by 2030, 30% of the employee population will retire. On top of that, as Ronak mentioned, with the rise of AI, the required skills are shifting. 

So, you need other skills, people need to transform. So that is definitely driving the key decision-makers when it comes to outsourcing, the skill shortage, customer experience and digitization. So much more than costs. 

“We need to rethink outsourcing and offshoring to not look at demographic segmentation, but psychographic segmentation. Psychographic segmentation is when there can be two people both living in New York City, making six income figures, but they could be very different people.  You'll realize your messaging, your experiences, and all of that must be designed for that. And we are seeing outsourcing evolving into this.” -Ronak Doshi 

RONAK DOSHI: Yeah. I agree. And we've seen it, I can give you one example, Michael, that will be interesting.  

We talked about customer experiences of the future with one of our clients in the US. And they were talking about how most of the segmentation of customers were done based on demographic elements, which is, “how old are you?” What income do you make?”  “Which location do you live in?” … All of those. 

You were able to run outsourced engines at high efficiencies looking at those parameters. But then what you realized is you have a lot of green on the outside of these outsourcing vehicles on customer experience transformation.  

However, if you look under the hood, see a lot more red, right? Because it's green on all the efficiency metrics to drive engagement with these demographics, but you realize the customer experience scores or the overall growth and the customer lifetime value. Those are parameters starting to hurt. 

So, your outsourcing parameters could be great, when you're measuring them, but your outcome parameters were not great. And that said, we need to rethink outsourcing and offshoring to not look at demographic segmentation, but psychographic segmentation.  

Psychographic segmentation is when there can be two people both living in New York City, making six income figures, but they could be very different people. One could be a beach person; another could be a mountain person. One loves to eat indoors, the other loves to go outdoors, and one is a dog person, the other is a cat person. 

You'll realize your messaging, your experiences, and all of that has to be designed for that. And we are seeing outsourcing evolve into that.  

All the suppliers in the market say we'll build dedicated data capabilities, analytics capabilities, and we'll bring that along with the right talent to help you shift toward that with the right design thinking tools and methodologies to build those experiences. So, we are seeing outsourcing becoming very close to the business. And it's not just two levels  

“So gone are the days when you want to do these expensive large RFPs and get immense amount of data from each of the individual suppliers and then trying to do a weighted average to find who's the best one because then eventually all the decisions are around price because cost becomes so critical. So instead of doing that, we are starting to see models around co-sourcing, co-innovation. […]  we are all aligning towards the common OKRs and let's work towards designing a solution around that.” - Ronak Doshi

HOST: I have a question regarding the approach, how the companies are approaching this change. How are banks and financial institutions changing this approach to outsourcing? 

RONAK DOSHI: Yeah, at least in my experience, there are a few areas where they're changing this approach. One is the entire outsourcing approach, which is who do I work with? How do I work with them?  

And then how do I contract with them?  So that becomes very critical. So gone are the days when you want to do these expensive large RFPs and get immense amount of data from each of the individual suppliers and then trying to do a weighted average mix and then trying to find who's the best one because then eventually all the decisions are around price because cost becomes so critical.  

So instead of doing that, we are starting to see models around co-sourcing, co-innovation. Let's sit together, our teams together as we are designing this product operating model, we are all aligning towards the common OKRs and let's work towards designing a solution around that.  

So, more co-innovation, co-sourcing, is where we are seeing some more hackathon-based hiring right in pod-based model.  

That is where we see a bit of an approach change in terms of the contracting then the conversation is it cannot just be a price-based model or an FTE based pricing.  

You have to also think about output and outcome based or a gain share or a risk share basis because as outsourcing becomes strategic you can't just talk about the cost you have to also talk about the value. 

So, contracting value is becoming important. So instead of talking about service level agreements, we are talking about experience level agreements.  

How are you driving the experience outcomes and how do you work together in a manner that is more productive? We've seen those changes happening quite a bit. This involvement of business and IT leaders along with the procurement teams to make this change happen is something that we see in pockets. It is not happening broad based, I see elements of it in places, but it's in the right direction. 

HOST: Okay, what do you think about it, Michael? 

MICHAEL NEUBERG: Yeah, I can only agree. Shifting customer experience, as we rightfully said early on, that's the key.  

It's about the output. It's about how the result is being delivered and what can be changed. It's not about costs being measured, but about the end-to-end view on the process and on the result that is going to be delivered on the quality, on the customer experience and satisfaction. So, this is much more important. 

And what Ronak said it’s also about strategic topics. It’s not only short-term focus. What I see as well is that companies are looking for partnerships on a longer lasting journey on this transformation roadmap that we are on now. 

HOST: I wanted also to focus on how outsourcing is related to digital transformation. What’s the role of AI in these companies? How these companies are applying outsourcing in order to integrate AI and automation strategies. What do you think? 

“The variety of topics of digital transformation are so broad; starting from the front end, the experience on the web, on the mobile, driving hyper-personalization, analyzing data up to back-office processes and all that stuff. So, if I want to do everything on my own, it will take me years. But I do not have years because competitors will do that rather, rather quickly. I mean, just look at what happened with DeepSeek and all the others.” - Michael Neuberg 

RONAK DOSHI: I think that digital transformation, as you mentioned, is about changing the way we work, driving innovation in work, and driving better outcomes. It’s the new way of working with innovation in the way we do the work. And that's where we've seen several technologies being used. So, as you mentioned, data, AI, RPA, cloud and several other technologies based on the requirement of that need. So, at the crux of it, everybody's trying to infuse a lot more of data and intelligence into the processes they run.  

They want to infuse AI intelligence to drive the outcomes on the processes, affecting processes like hiring people better and faster, beating an HR process or even helping close new loan accounts, so do originations better. 

It can even help to resolve customer queries faster, or it can also help keeping  systems up, upright again, so that I have 99 % or 99.99 % availability.  

So those are the pieces where you want to drive those outcomes of those processes, also using data to measure them, make it better, bring the tools to kind of infuse that intelligence. So, digital transformation is all about that.  

It is a continuously iterative process to make the outcomes come faster. So, this is about speed and then this change that you are driving. So, the speed of change is what becomes most critical when we are talking about the role of outsourcing and digital transformation because banks - and let’s say insurance companies- could do this on their own, but the speed that the external force allows you to get is what you're looking at it. The outsourcing partners are bringing experience of having seen this with other banks. 

They bring talent, they're making investment in R &D, they're bringing partners, that external force helps you to make the change faster. And I think that is where this resonates really well with me, where we put outsourcing and data transformation together because they really go in unison. 

MICHAEL NEUBERG: I like what you said, Ronak. It's all about speed. I mean, what we see at the moment, the speed is really breathtaking. What we see in the domain of AI and all the things is that there are always these discussions, should I do it on my own or should I outsource? Or what do I do on my own or should I outsource? But I'm a strong believer that if you try to do everything on your own, you at the end will fail because it will take you too long.  

The variety of topics of digital transformation are so broadly starting from the front end, the experience on the web, on the mobile, driving hyper-personalization, analyzing data up to back-office processes and all that stuff. So, if I want to do everything on my own, it will take me years. 

But I do not have years because competitors will do that rather, rather quickly. I mean, just look at what happened with DeepSeek and all the others. Even though they're already in a very, very quick and fast domain. That’s clearly what is driving outsourcing as well as the speed of innovation, paralyzing activities: not making each mistake on your own, but getting a partner who has done the learning curve already and who as an expert, as Ronak said, has more talent. So, choose your battles, choose your topics, and then choose the right partner to speed up the digital transformation. So that's clearly a drive that we see for outsourcing and how this connects with the current developments we see. 

HOST: You both mentioned some pain points and use cases that are being applied in the banks, but I would like to know what the key processes in these companies that could be are best suited for outsourcing today. 

MICHAEL NEUBERG: From my point of view, you can't say like that's the department, or that's the area you should outsource. It depends a little bit on the maturity and strategy and positioning of the respective companies. 

Generally said, I think we're coming from history. IT was a clear focus point of outsourcing. Like Ronak said, this “run the bank or change”, and now it's going over to change the bank during the transformation. But as well, from my point of view, it's all IT, it's back office, so it’s going down to operations. That’s more or less the whole chain. 

And it even gets more important, from my point of view, as if I look down the value stream or if I look from an end-to-end process perspective - I'm not looking at that part of the IT or that part of process. I'm looking at the end-to-end process. - So, for me, there's no clear answer,  if it’s needed to outsource securities or outsource payments. So, it depends on where you have your experts, where you have your focus, what's your go-to-market proposition and what are your pain points from a banking point of view. 

And then you need to align the best fitting operating model jointly with the outsourcing partner. That's my answer. At the end, it's broad. And it goes from IT to operations, so it affects the whole value chain. 

So, Ronald, it'll be interesting if you see the same or what's your experience. 

RONAK DOSHI: I would say yes, there are areas where we have a large volume of scalar work to be done and definitely talent becomes a challenge. So, IT definitely becomes one where we see a lot of activity from everything from application development to support testing to managing the infrastructure, helping around these securities operations center and network operations centers. I think this does require very specialized capabilities, right? For example, running a SOC is not a core competency for an insurance company, so that's where you get the right experts from the security worlds, which are doing R &D continuously on the challenges that are happening in the world. So, those definitely are areas where we see it, and then it moves into functions of businesses. 

For example, let’s say processing: origination processes across mortgages, right across cards and payments and banking, and all of those that are servicing them to doing all the back office reporting compliance… this kind of areas.  

We've seen a strong spike in the compliance world. So, regarding financial crime and compliance as a whole, we have seen a bit of a spike in terms of the volume of outsourcing. And I think that it’s an area where as the transactions become more digital, you start seeing that the attack and the sophistication of fraud and attacks on the banks also increase.  

That is where the compliance mandate also increases; I would say that those are the areas where we are seeing growth, and then definitely data as a whole; given the fact that you need the data playbook for AI and for automation. So, we are also seeing a lot of activity around data in terms of outsourcing. 

HOST: Given the highly regulated nature of BFSI, what compliance risks do companies face when outsourcing processes? 

RONAK DOSHI: Yeah, so as we look at it in terms of compliance and the risk that the companies face, there are all these financial services institutions that have a third party risk management function where they're looking at the financial risk, the legal risk, the technological risk and other brand risks of working with a supplier. If there are challenges with the supplier, it also reflects bad on you because you're working with them. So, you have to make sure that their brand is additive to what you are doing and should not be going against common values.  

I think that this fact becomes important. We also see elements of location risk, because what happens if you are delivering services from a location which has certain geopolitical challenges?, like other issues that can come up. Those are also challenges that are  potential risks that you look at when you're outsourcing, and these need to be balanced really well.  

We’ve seen sophisticated models being built just to look at all of these different risks when you're doing outsourcing, and the suppliers that you work with. And it is not an individual supplier risk. It's the portfolio that you then have to start managing, right?  

You will always want to work with challengers in the market, but then also at the same time, you want to balance the risk: for example, you want to work with somebody who has a huge amount of financial debt, and if that’s the case, then you realize that could be a risk of continuity of the supplier. And if the supplier doesn't continue, you have risk on your business continuity, so those are the things that becomes very critical when you're planning business continuity or disaster recovery and those principles specifically around IT. 

HOST: Michael, what do you think about it? How do we ensure that outsourcing solutions align with evolving regulations? 

MICHAEL NEUBERG: I think that's it’s clear, that you need to comply and align with all these regulations besides the risk measures that Ronald rightfully mentioned. You need to align with FED, with BAF, and with FINMA; with all the authorities. And I think there are clear processes defined when working with respective vendors or outsourcers, meaning there's a close alignment on latest regulations. 

And because the goal is as well to adapt that for multiple customers, I think that's even an advantage when outsourcing partially, just because all these regulations are coming with costs. And normally the customer is not paying for it.  

This happens with the private customer for sure, because he just assumes that everything goes right. So, there are regulations, even if you're not outsourced, that might hit you. If you're outsourced, then this can be an opportunity to leverage or to scale the cost that you have. You need experts that are always up to date.  

As Ronak said as well, there are departments to monitor you. There are good contractual agreements and SLIs, KPIs, OKRs - as Ronak said - by how it's going to be measured, and that you need to comply, and that it's fine. And then for sure, you have as well opportunities like certifications, audits, reviews, external reviews.  

Even as a bank, if you're outsourced, you always have the right to audit by your own, on top of the external and other audits that, for example, an outsourcing provider would do as well. So, by that, I think there are multiple lines of defense to ensure that you comply with latest regulations. 

RONAK DOSHI: Yes. 

HOST: I think we can move to the other section of the episode, which is the future of strategic outsourcing. Just an open question for both of you, what does the future of outsourcing in BFSI looks like? Where are we going to be in a five years period? 

RONAK DOSHI: So if I have to do the crystal ball gazing,  and think where we will be in five years from now, I definitely see there's a strong role of outsourcing in financial services. The core competencies of banks are going to be about how do I create platformed approaches to go after my customer segments and provide the product and experiences that they care about most, right? If I look at commercial banks, we're talking about how to create offerings for each of the industry verticals that I go after, like healthcare, travel, transportation, retail, large conglomerates, etc. How do I create offerings for them, which aligns to their goals and vision? And how can I, as a bank, be that partner of choice for everything that they need for their financial security and business operations? And as banks become that, their core competency is going to be about the product design, the services design, the channel design, the platform that they use to drive that. 

To make all that happen, you need strong engineering capabilities: you need strong data capabilities, strong IT infrastructure and computing capabilities. You need to manage complex network and security, and also you need to manage complex processes.  

You can't expect a bank or an insurance company or a capital market firm to build all those capabilities internally. So, what we believe is that you're going to have a lot more complexity in the financial services environment, and it gets multiplied by the compliance effort on top of it;  you have to play around with that. 

So that is where this is going to expand. I see a significant amount of expansion of complexity and scale in the products, in the services, in the channels, and in the ways banks operate and serve their customers. They're going to have much more influence. They're going to grow much bigger. And there's going to be much more compliance that they need to manage with.  

A lot of the core competency is going to be around that risk: Product – process – experience, and everything else to do with is where outsourcing becomes very critical to augment that the banks are doing. 

The other piece that I believe is that banks will want to take advantage of the global talent model and set up their own centers, their own global capability centers or GICs, global in-house centers, or captives. As they set that up, outsourcing suppliers will have to work with these captives as well as the enterprise entity together in a coordinated manner because a bank or an insurance company may want to run a global product operating model, and they may have product teams sitting across the globe. 

And you would want the outsourcing team to augment them and work with them along the globe, you know, wherever the bank is. Working in lockstep with them is going to become very critical. And as you do a lot of that, we do believe this is going to be a market which is not just going to be about people-led, it's going to be a people plus technology-led model. 

You will also see outsourcing being different because the work that was required, let’s say, 100 people today will require much lesser. But it's just that if you are doing work with 100 people and you may be doing it with 60 people in the future, it's just that that work will also increase 5x. So, you still need more people, but the amount of work that we're kind of driving per person will increase dramatically, given the productivity benefits of AI and other technologies that we see.  

I'm very excited in terms of the opportunity out there, the growth out there, not just for outsourcing, but financial services and industry, because it is taking off. It's taking over in a big way; we do see a lot of activity out here. 

HOST: What are your thoughts on this, Michael? If you had a magic ball and you can peek into the future... 

“One thing that something like DeepSeek does is that it tells you that we can get with a lower cost of consumption on AI. I think that's the big challenge that we were facing. Everybody wants to infuse AI, specifically generative AI, as part of every work they do but the cost was prohibitive.”  - Ronak Doshi 

MICHAEL NEUBERG: I would love to have one, but I have not found where I can buy it. So, if someone knows, please give me a ring [laughs]. No, jokes aside. I underline what Ronak said as well. Perhaps I can summarize on three topics that I see there as well. 

First, it is going to expand, I believe that as well. Secondly, it's more about strategic partnerships as we are looking from an end-to-end perspective. So that is important as well, and as Ronak said, collaboration with internal teams, external teams, front office, middle office, etc. 

The partnerships take a long-lasting journey to develop. So that is the second part where I strongly believe that will grow; not just something like having someone who's crunching some numbers and then saving some costs. This will move downwards.  

And the third part, technology and process: they will melt together. For me, it's about people, process, and technology. That's the mix.  

If you look from an end-to-end perspective, you need to combine these three worlds. So as well for the outsourcing of BFSI in general, it's important that you only add IT because IT enables business. Business is there for our customers. It's about the process; you need to combine these forces and as well it is important for the outsourcing provider to have a joint view on that. So, these were the three things; I have the same point of view.  

HOST: I think we cannot talk about the future without also talking about the disruption of technologies like, for example, DeepSeek, which this past month has been shocking all the markets worldwide. With these models rapidly advancing, how do you see them disrupting the traditional outsourcing models? 

RONAK DOSHI: So I think Miguel, one thing that something like DeepSeek does is that it tells you that we can get with a lower cost of consumption on AI. I think that's the big challenge that we were facing. Everybody wants to infuse AI, specifically generative AI, as part of every work they do but the cost was prohibitive. Now there is a directional sense in this trend, with the idea that this is possible, or at least it will force everyone to think in that direction. This will make this cheaper to consume, and cheaper to build. And then obviously, if it's easy to build, easy to operate, easy to integrate, and it's also cost effective, then you will have more adoption.  

We are already working on the parameters of making it easier to build, making it easier to integrate and easier to operate. Something that they were already doing, but the cost was prohibited.  

So, as we bring that down to implement more techniques, I don't believe we're going to stop at what we've seen from DeepSeek. We're going to see a lot more innovation in this market. 

That is where we get excited about it is as the cost goes down, you realize that yes, there is a potential play where you can now do the arbitrage that you get from outsourcing because of the people process tech that Michael talked about. Plus if you add the power of AI agents to it, you can actually get a much more high productivity. So the people process tech plus AI agents combination is the future of outsourcing as we think about it. 

And that's where it will be interesting to see how buying and outsourcing is changing. Contracting will become something like, “I have a contract which has 100 people and 300 bots” and you have to price for it. Because at the end you're not pricing for 400 FTs, but you're pricing for 100 FTs and 300 agents. And how do you do that together?  

That is where our research and our point of view is developing towards. There's a lot more uncertainty. We haven't seen all of it. So, the point of view will keep developing, but that's where it becomes very exciting. When the people plus bot model or people plus agent model will take over a lot of these processes as we look at it. 

MICHAEL NEUBERG: And from my point of view, the pricing probably will change more to the outcome. I think a little bit about what we talked about as well. ou're not paying people or I'm not paying 400 FTE and then I'm paying for service on outcome. And independently, if there are then two FTEs and the bot or three bots and a half FTE or whatever, I think at the end it's about the business value for the service you provide. And I think that's what we will see.  

Regarding to your question,  it will definitely disrupt, I think. So you need to combine these new technologies in order to bring new services into these things. 

You will not be efficient if you don't use these kinds of new technologies as well as an outsourcing provider. I think that's really crucial.  

Ronak was also talking about costs, and if you look at today's landscape, costs are really high. Seventy percent of POCs fail—either due to quality issues, lack of knowledge and staff, or cost partially because you don't find a good business case due to the still high cost of these technologies though they will come down. As Ronak said, that's where DeepSeek will bring a push.  

Competition is always good for price. So, that's what you're going to see. And if it's going to be cheaper, we will see much more of these kinds of new technologies used in servicing these processes, and then this will definitely change the BFSI as a segment and as well the companies and how they work. So standardized tasks are going to be automated even more and, and the more you use these resources then for coding and prompting, you will need more and more, and I think there will be a mix as well of business knowledge and technology knowledge. You will need good prompts, but you also need to understand the business and that's where I think where we're going to see a change. 

HOST: Perfect. I think we've reached the final question. Thanks a lot for your words, for your expertise. But I want to ask you the last question, which is, if you had to summarize quickly the biggest opportunity and the biggest challenge that BFSI companies face in outsourcing today, what would it be? 

RONAK DOSHI: So, for me, the biggest challenge is the rate at which technology and innovation is happening outside of the banks. We see a lot of change management activities that needs to happen, and the change is across business, products, and again, the same conversation around sourcing, IT. 

A lot of folks have to align to a continuously evolving change. Banks and insurance firms and capital market firms like the stability of it. You set up a process, let's keep running at it. What we are seeing out here is there's an external force of this technology which is expecting you to change and change really fast as we spoke about the speed of change. So, I think the biggest challenge is going to be about how do you keep up with everything going around you and bringing the best of the innovation internally to help your customers and help your business grow better; that is going to be the big challenge. So this speed of change for me is going to be the number one priority. 

HOST: What about you, Michael? 

MICHAEL NEUBERG: Yeah, so a little bit differently phrased, but I think hitting exactly the same topic. I thought when you asked the question about whether it's not regulation or it's not technology, the biggest challenge in my eyes is transformation and change management. Process requirements for significant change due to AI. We need to think end to end what we talked about in this podcast, which needs to come from a custom point of view, independently how the organization is currently built within departments across silos. So, it’s important to split competencies, trust in a partner and as well, getting or bringing in a new partner and trusting him on taking over some of crucial activities. I think that all this mind change and process change, that's the biggest challenge from my point of view in order to get it done.  

It's a huge change for all employees involved, but as well for all stakeholders. So, in my view, that change is the biggest challenge and it needs to be handled. It's really a transformation that we're in. That needs to be seen as well from banks, but also from respective providers or all involved stakeholders. 

 So talking about challenges, it's a change of transformation, but talking about opportunities, I think the biggest opportunity is definitely growth, rising customer satisfaction, as well as identifying new business and business opportunities with these things that are happening at the moment. So, AI will transform the business. It's not technology alone that will do the trick. 

But it's a huge opportunity to really open new markets, to grow, to outpace the competition. And in my view, it's at the end all about the right mix of people, process and technology. And that's the big opportunity, I think. 

Ronak, you can tell your point of view as well. 

RONAK DOSHI: Sure, I'm happy to add. Michael, as I think about the biggest opportunity, I would agree with what you said, which is how do I drive growth for the business and how do I align outsourcing initiatives to my growth objectives as I come back to my OKRs. 

So, if we define the business OKRs, how are we aligning outsourcing to those same OKRs and measuring them on those outcomes is going to be the big opportunity that we see.