Strategic sourcing decisions: A Swiss bank responding to the dynamics of the core banking system market

Abstract

This case examines strategic challenges encountered by Berner Kantonalbank (BEKB), a prominent regional Swiss bank. The bank adapts its sourcing decisions related to its core banking system amidst the evolving landscape of the core banking software market. The narrative unfolds against unfulfilled strategic goals in a changing IT industry, revealing the complexities and decisions that shape BEKB’s approach to core banking system sourcing. In 2010, BEKB outsourced its core banking solution to Hewlett Packard (HP). This encompassed the transfer of all employees of its former subsidiary, RTC. RTC had formerly developed and operated BEKB’s core banking solution. The strategic move to outsource aimed to leverage HP’s capabilities for cost-effective core banking system operations. BEKB anticipated enhanced core banking system capabilities at a reduced cost, while HP sought to establish itself in the core banking software market. However, instead of expanding BEKB’s core banking system customer base, clients increasingly migrated to other providers. The evolving circumstances placed BEKB and HP in a mutual dependency, reaching a critical juncture when the bank decided to terminate the contract, which yielded a spectrum of strategic options. The decision taken endured for a few years. Subsequently, another strategic reevaluation was necessary. This case delves into the intricate interplay between sourcing decision and IT software product dynamics, offering perspectives from client and vendor. It sheds fresh light on strategic sourcing decision-making within the evolving landscape of an increasingly complex IT services environment.