FSA warns banks to 'wake-up' to dangers of outsourcing

The Financial Services Authority (FSA) has criticised finance firms for not taking enough responsibility when outsourcing IT functions.

Michael Foot, head of the FSA, said financial companies' senior managers are not aware of ongoing IT projects, and that they are failing to take responsibility when IT projects go wrong. He also said that finance companies are cutting costs by not employing enough staff to work together with the contractors.

Gary Cooper, research manager at analysts Butler Group, blames miscommunication between outsourcing companies and their customers.

Cooper said: "In large corporations, the IT decisions are made without consulting the relevant IT managers working with the project itself. IT managers need to be involved in the decision making at all times, not just when it comes to the execution of the project.

"When IT projects go wrong, the management starts to look for someone to blame. Cost effectiveness to a financial company will become short term if the project fails because of poor communication between departments," he added.

But Paul Bradford, head of corporate IT at Prudential, claimed his company has adopted a more responsible approach. "At Prudential, each business unit makes a decision independently and any IT related issues will go through the IT department. If we have a service level agreement (SLA) with an outsourcing company, it is up to the sector manager to follow that particular arrangement," he said.