Operations and IT sourcing in Financial Services The ING approach

1. Université de Liège 27/04/2006 Operations and IT sourcing in Financial ServicesThe ING approach André Vanden Camp ING Belgium – Managing Director ING Group - CIO Applications Wholesale Banking

2. Introduction to ING Group

3. Top 20 global financial institutions

4. Top 20 financial institutions in Europe

5. Top 20 global financial institutions 1991 – 2005

6. ING: a world-wide group About 114,000 employees more than 50 countries

7. ING Group Pedigree De Nederlanden est. 18451845/1963 De NationaleLevensverzekering-Bank 1863/1963 Rijkspost-spaarbank1881/1986 Postcheque- en Girodienst1918/1986 Life of Denver1977 RVS1984 Postbank1986/1989 NederlandseMiddenstandsbank1927/1989 Southland Life1989 Westland UtrechtHypotheekbank 1985 Western Union1988 Halifax1959 Mercantile Mutual1987 Belair Direct1989 The Commerce Group 1989 Nationale-Nederlanden1963/1991 NMB PostbankGroup1989/1991 1991 Bank BrusselLambert 1998 Bank Slaski2001 Wellington1995 Allianz of Canada2004 Aetna2000 Equitable of Iowa1997 Barings1995 DiBa2002 Guardian1998 Canadian GroupUnderwriters 1999 Seguros ComercialAmérica 2001 ReliaStar2000 Furman Selz1997 Bank Mendes Gans1997 Parcom1994 Rodamco Asia2004 Clarion1998 Banking Insurance Asset Management 1970 Year of acquisition 1845/1963 Year of founding / Year of merger

8. ING Group Organisational structure ING Group Insurance Europe Insurance Americas Insurance Asia– Pacific Wholesale Banking Retail Banking ING Direct Operations and IT Banking

9. Context

10. Developments at ING level ING has the ambition to be a global financial player with focus on certain service areas and markets. Needs a winning performance culture to match the performance of our peers ING lines of business (Retail / Wholesale) need a considerable improvement of their cost/income ratio to stay successful in the mature home market of the Benelux.  Potential for expansion is limited, so lowering costs is crucial Fiercer competition for Ops&IT Banking (traditional and virtual) because of accelerating technological developments Consequence for Ops&IT Banking : Internal customers are increasingly critical and demand quicker service and better quality for a competitive price with an improved customer focus and maximum operational flexibility

11. What does this mean to Ops&IT Banking ? Need for improved customer- focussed performance  focus on core activities Need for cost reduction and cost transparency Focus on Service Management  from “building applications” to “providing a service” Internal service providersoperations -applications -infra Internal customer A Service ManagementOrganisation Outsourcers Internal customer B Internal customer C Application Software providers

12. BPO versus ITO Outsourcing of application maintenance and development Outsourcing of Technical Helpdesks Outsourcing of Infrastructure operations

13. Example of potential BPO in ING : Document Services • The DockINGproject : outsourcing of document services in NL, BE and PL • Scope : Post opening – Scanning - Data capture – Enrichment – Presentation – Printing – Fulfillment – Reprographics - Preparing for Mail - Mail Delivery • Transfer of Assets and Staff • Main objectives : • Fixed costs converted to variable • Assets refresh included in contract prices • No contract changes unless volume drop below 80% of forecasted volume baseline

14. Example of potential Infra outsourcing in ING : Workplace Services (1) Scope of the outsourcing : All hard & software for: • Desktop/laptop (including printers, multifunctionals, file/print servers, GRAS, building LAN) • Mail/collaboration (including email, webmail, remote mail, exchange, outlook, sharepoint) • Telephone systems (Classic/PBX, CTI, CMS, VRU, mobile, PDA, GSM, blackberry, audio/video conference) • Workplace services delivered fromNL & BE In other words: everything on the desk except the pencil and the desk

15. ING IT infrastructure ING IT Infrastructure ING IT infrastructure Integrator Integrator Integrator Service Service Bundle Service Bundle End End End - - user user user Bundle Desktop Desktop Desktop Server Bundle Server Server Bundle Voice Voice Voice Bundle LAN LAN LAN desk desk desk computing computing computing hardware hardware hardware management Management Management Example of potential Infra outsourcing in ING : Workplace Services (2) Scope bundled for multiple external suppliers through one integrator : The Integrator manages all the bundle suppliers. A Preferred Supplier provides service for a particular Bundle. The suppliers and the integrator make up a Preferred Supplier Team.

16. applications “Rightsourcing”

17. Rightsourcing is about finding the balance between inhouse sourcing and different types of external sourcing • Rightsourcing is about finding a balance between inhouse and external sourcing External Sourcing is about finding the right collaboration model with the right supplier • Outsourcing is not a target, but a means to reach our objectives RIGHTSOURCING : Own staff Home made applications in house responsibility External staff On site / on shore 3rd party responsibility= outsourcing Near shore Off shore customize & manage inhouse Software packages Own staff External staff Software Standardized software provided by 3rd party Software + hardware

18. Rightsourcing is about selecting the right sourcing model … • Evolution towards outsourcing requires internal maturity and mutual trust and therefore time • Selection of the right supplier is critical to grow towards partnership • Decision criteria to chose between in house and external sourcing is key

19. for the right activities… 1. Evaluate risksWhat applications can we outsource ? High Complexity could be overcome by segmentation or knowledge transfer Best candidates for outsourcing Capability :eg : • maturity requirements mgt & testing • Market readiness • Available documentation Appl. 1 Appl. 2 Appl. 3 Capability Appl. 4 Could present challenges for Rightsource Capability could be overcome by structure, consistent processes and tools Complexity :eg : • Stability of the application • Application interconnection • Business criticality Low Appl. 5 Low High Complexity Relative size of appl. in FTEs 2. Evaluate benefitsWhat applications should we outsource ? High Good candidates for ousourcing but limited cost reduction potential Best candidates for outsourcing Business Value (non financial) :eg : • Make costs variable • Guarantee service continuity • Find scarce resources • Focus on core activities • Avoid direct dependency form changing external regulations Appl. 1 Appl. 2 Appl. 3 Cost reduction is not always the primary driver Business Value if Outsourced Appl. 4 Weak business case to outsource Good candidates for outsourcing but limited direct business value contribution Cost reduction potential : Financial business case Appl. 5 Low Low High Cost Reduction Potential Source : CapGemini

20. with the right supplier … We select a limited number of suppliers to build long term partnerships : supplier A B D C E F But also need to be (and remain) attractive to our suppliers :

21. in the right location Mitigation Criteria / KSF Advantages Risks Security Issues Pilot Phase Small applications /projects Cultural fit Limited transition risks Transfer of staff possible Limited economies of scale No (or limited) process optimisation (on site) Higher staff costs 100% variable costing model Dual shore model Onsite / Onshore (BE/NL) Offshore Need for formalised change management processes Reasonable (transition/ translation costs) Big work volumes Lower staff costs (-40%) 24/24 activity if needed Culture / language gap High start-up costs Service windows Dual shore model ODC-concept Preferred vendor relationship SLA’s based on CET Nearshore Need for formalised change management processes Reasonable (transition/translation costs) Lower staff costs Cultural and geographical proximity smoothens communication.same timezone Possible culture / language gap High start-up costs Dual shore model ODC concept Preferred vendor relationship

22. Conclusions