Information systems outsourcing in Croatian banks: developments 2005–2012

Figures & data

Figure 1. Typical CEE banking group structure and potential outsourcing service providers.

Source: Authors.

Table 1. Outsourced activities.

What activities (related to information system) are outsourced?	Nr. of ans. (2005)^1					Nr. of ans. (2012)^4					Changes (Nr.)^2			V-D A (‘12>’05)^3
	1	2	3	4	median	1	2	3	4	median	Decr.	None	Incr.			Cliff’s δ^4		Z^5	p^6
Hardware Maintenance	3	8	11	9	3	11	9	7	4	2	17	7	7	0.339	↓	−0.323		−2.158	0.039	*
Data Processing	20	8	2	1	1	17	11	1	2	1	7	14	10	0.548		0.097		0.722	0.476
Business Application Development	6	8	8	9	3	4	9	9	9	3	5	18	8	0.548		0.097		0.828	0.414
Business Application Maintenance	5	9	9	8	3	4	9	9	9	3	6	16	9	0.548		0.097		0.769	0.448
Management and maintenance (M&M) of operating systems	12	9	6	4	2	22	7	1	1	1	17	9	5	0.306	↓	−0.387	†	−2.834	0.008	**
M&M of telecommunication networks	2	13	5	11	3	13	9	4	5	2	17	10	4	0.290	↓	−0.419	†	−3.243	0.003	***
M&M of databases	10	11	4	6	2	17	7	4	3	1	14	10	7	0.387		−0.226		−1.563	0.129
M&M of security infrastructure	13	9	5	4	2	19	8	2	2	1	14	13	4	0.339	↓	−0.323		−2.559	0.016	*
Internet website development and maintenance	16	4	5	6	1	13	7	9	2	2	9	12	10	0.516		0.032		0.226	0.823
Development and maintenance of e-banking applications	16	5	3	7	1	16	6	3	6	1	11	9	11	0.500		0.000		0.000	1.000
Call centre	21	6	2	2	1	26	4	1	0	1	10	17	4	0.403		−0.194		−1.647	0.110
Helpdesk	25	2	3	1	1	28	3	0	0	1	6	23	2	0.435		−0.129		−1.438	0.161
Data mining	25	3	3	0	1	23	4	3	1	1	4	21	6	0.532		0.065		0.626	0.536

¹ Number of answers in a certain category for a given year. Ordered (ordinal) categories are as follows: 1: Not outsourced, 2: Some components are outsourced, 3: Most components are outsourced, 4: Everything is outsourced

² Number of occurrences of 2012 answers having smaller, same or higher value than respective 2005 answer (limited to the pairs).

³ Vargha and Delaney’s A measure of stochastic superiority, for 2012 answers being higher than 2005 answers (limited to the pairs). Value of A less than 0.36 or larger than 0.64 denotes medium or large effect size (marked with arrows) as recommended by Vargha and Delaney. Direction of arrows signifies increase or decrease.

⁴ Cliff’s |δ| values larger than 0.33 are interpreted as a medium effect (marked with †) and values larger than 0.474 are interpreted as a large effect (marked with ††). Sign marks increase or decrease.

⁵ Estimate of Cliff's δ Z-score. Since data is ordinal and in most cases not normally distributed (as seen from distributions of answers), this is only an approximation and is displayed primarily for orientation.

⁶ p value in relation to estimated Z-score. p values are additionally denoted: less than 0.001 (****), less than 0.005 (***), less than 0.01 (**), less than 0.05 (*).

Source: Authors’ calculation, based on banks’ survey conducted by the CNB.

Table 2. Reasons for outsourcing.

What were your reasons for outsourcing?	Nr. of ans. (2005)^1					Nr. of ans. (2012)^10					Changes (Nr.)^2			V-D A (‘12>’05)^3
	1	2	3	4	median	1	2	3	4	median	Decr.	None	Incr.			Cliff’s δ^4		Z^5	p^6
Better focus on (provision) of core banking and financial services	0	1	16	14	3	3	7	12	9	3	15	10	6	0.355	↓	−0.290		−2.065	0.048	*
Cost reduction	0	2	17	12	3	4	6	18	3	3	16	12	3	0.290	↓	−0.419	†	−3.474	0.002	***
Better control of operating expenses	0	6	22	3	3	5	10	12	4	3	14	12	5	0.355	↓	−0.290		−2.187	0.037	*
Freeing up resources for other projects	2	6	17	6	3	2	8	13	8	3	10	11	10	0.500		0.000		0.000	1.000
Lack of necessary expertise and resources	2	6	15	8	3	3	5	8	15	3	9	9	13	0.565		0.129		0.849	0.403
Business processes reengineering	6	17	7	1	2	9	17	5	0	2	13	11	7	0.403		−0.194		−1.360	0.184
Better service	0	3	14	14	3	4	4	18	5	3	16	13	2	0.274	↓	−0.452	†	−4.030	0.000	****
Access to new technologies	2	5	12	12	3	7	9	11	4	2	20	7	4	0.242	↓	−0.516	††	−3.967	0.000	****

¹ Number of answers in a certain category for a given year. Ordered (ordinal) categories are as follows: 1: Not important, 2: Slightly important, 3: Important, 4: Very important.

² Number of occurrences of 2012 answers having smaller, same or higher value than respective 2005 answer (limited to the pairs).

³ Vargha and Delaney’s A measure of stochastic superiority, for 2012 answers being higher than 2005 answers (limited to the pairs). Value of A less than 0.36 or larger than 0.64 denotes medium or large effect size (marked with arrows) as recommended by Vargha and Delaney. Direction of arrows signifies increase or decrease.

⁴ Cliff’s |δ| values larger than 0.33 are interpreted as a medium effect (marked with †) and values larger than 0.474 are interpreted as a large effect (marked with ††). Sign marks increase or decrease.

⁵ Estimate of Cliff's δ Z-score. Since data is ordinal and in most cases not normally distributed (as seen from distributions of answers), this is only an approximation and is displayed primarily for orientation.

⁶ p value in relation to estimated Z-score. p values are additionally denoted: less than 0.001 (****), less than 0.005 (***), less than 0.01 (**), less than 0.05 (*).

Source: Authors’ calculation, based on banks’ survey conducted by the CNB.

Table 3. Outsourcing risks.

Evaluate risks related to outsourcing	Nr. of ans. (2005)^1					Nr. of ans. (2012)^16					Changes (Nr.)^2			V-D A (‘<12>’05)^3
	1	2	3	4	median	1	2	3	4	median	Decr.	None	Incr.			Cliff’s δ^4		Z^5	p^6
Loss of control over contracted services	6	16	7	2	2	0	16	15	0	2	6	10	15	0.645	↑	0.290		2.065	0.048	*
Operational risk^7	4	14	9	4	2	0	14	16	1	3	8	9	14	0.597		0.194		1.293	0.206
Loss of knowledge and skills within the bank	7	14	10	0	2	5	14	12	0	2	8	10	13	0.581		0.161		1.095	0.282
Financial risk (e.g., the risk of increasing costs)	1	20	9	1	2	0	12	16	3	3	4	13	14	0.661	↑	0.323		2.559	0.016	*
Reputation risk	10	14	4	3	2	1	18	12	0	2	5	10	16	0.677	↑	0.355	†	2.617	0.014	*
Legal risk (e.g., non-compliance with regulations)	10	17	4	0	2	0	24	6	1	2	4	12	15	0.677	↑	0.355	†	2.785	0.009	**
Risk associated with the country of origin of the service provider	23	5	1	2	1	17	13	1	0	1	5	17	9	0.565		0.129		1.072	0.292
Risks related to security of information systems	4	17	6	4	2	1	18	10	2	2	8	11	12	0.565		0.129		0.891	0.380
Cultural and social issues (employee resistance, differences in approach to clients ...)	16	14	0	1	1	9	18	4	0	2	6	9	16	0.661	↑	0.323		2.270	0.031	*
Technical limitations	7	14	7	3	2	3	23	5	0	2	9	15	7	0.468		−0.065		−0.494	0.625
Decline of service quality	6	21	4	0	2	0	26	5	0	2	4	17	10	0.597		0.194		1.647	0.110
Data confidentiality breach	5	17	7	2	2	1	13	15	2	3	7	9	15	0.629		0.258		1.763	0.088
Strategic risk	11	12	8	0	2	0	17	14	0	2	4	11	16	0.694	↑	0.387	†	3.013	0.005	**

¹ Number of answers in a certain category for a given year. Ordered (ordinal) categories are as follows: 1: No risk, 2: Low risk, 3: Medium risk, 4: High risk.

² Number of occurrences of 2012 answers having smaller, same or higher value than respective 2005 answer (limited to the pairs).

³ Vargha and Delaney’s A measure of stochastic superiority, for 2012 answers being higher than 2005 answers (limited to the pairs). Value of A less than 0.36 or larger than 0.64 denotes medium or large effect size (marked with arrows) as recommended by Vargha and Delaney. Direction of arrows signifies increase or decrease.

⁴ Cliff’s |δ| values larger than 0.33 are interpreted as a medium effect (marked with †) and values larger than 0.474 are interpreted as a large effect (marked with ††). Sign marks increase or decrease.

⁵ Estimate of Cliff's δ Z-score. Since data is ordinal and in most cases not normally distributed (as seen from distributions of answers), this is only an approximation and is displayed primarily for orientation.

⁶ p value in relation to estimated Z-score. p values are additionally denoted: less than 0.001 (****), less than 0.005 (***), less than 0.01 (**), less than 0.05 (*).

⁷ For example, risk associated with the loss of data and control over significant business processes, the risk associated with the use of information technology, the availability of services, the risk of interruption of business continuity, transaction risk, etc.

Source: Authors’ calculation, based on banks’ survey conducted by the CNB.

Table 4. Outsourcing of application and infrastructure elements processing.¹

		Croatia			Abroad
		In group		Out group	In group			Out group
	Number	Bank%	Service provider%	Service provider%	‘Mother’ bank%	‘Sister’ bank%	Service provider%	Service provider%	Other%
All applications	907	77.84	10.58	5.62	0.33	2.32	1.43	1.87	0.00
Important applications	535	79.63	9.91	5.23	0.37	1.87	2.06	0.93	0.00
All infrastructure	657	92.24	3.04	3.50	0.61	0.00	0.46	0.00	0.15
Important infrastructure	351	91.17	2.56	4.56	0.57	0.00	0.85	0.00	0.28

¹ Answers of all credit institutions are included. All percentages in one row add up to 100%; Column ‘number’ denotes number of applications and infrastructure elements that institutions defined. ‘Important’ applications and infrastructure elements are those that were rated, by credit institutions, as extremely important of very important (on a scale that also included ratings medium importance, low importance and unimportant. The answers are grouped so that, for example, 10.58% in the first row, fourth column denotes percentage of applications that are processed in a service provider that is in-group with credit institution and located in Croatia.

Source: Authors’ calculation, based on banks’ survey conducted by the CNB.

Table 5. Summary of Table 4 results.¹

	Location		Group relationship
	Croatia %	Abroad %	In group %	Out group %
All applications	94.05	5.95	92.50	7.50
Important applications	94.77	5.23	93.83	6.17
All infrastructure	98.78	1.07	96.35	3.50
Important infrastructure	98.29	1.42	95.16	4.56

¹ This table presents summarized results from the Table 4.

Source: Authors’ calculation, based on banks’ survey conducted by the CNB.