Chapter 1: National Savings and Investments Uses Outsourcing to Transform

Overview

This book is about transformational outsourcing. I hope to convince you that transformational outsourcing is a powerful tool that executives can use to achieve dramatic improvements in their organizations’ performance. Most often when I introduce the topic, however, executives’ eyes glaze over or they suddenly remember an urgent appointment. They don’t see outsourcing as something they should care about. Yes, they know they can probably use it to reduce costs in some areas, but they would not consider it a strategic tool. So I tell them the story of National Savings and Investments. Then they get interested. Here’s the story . . .

On September 30, 2002, Alan Cook took over as CEO of National Savings and Investments (NS&I), the home of arguably the most successful transformational outsourcing deal in the world. National Savings and Investments (NS&I), an executive agency of the Chancellor of the Exchequer, helps fund the UK national government by selling retail savings products. In 2002, it had more than 60 billion (almost $100 billion)^[*] under management, making it one of the largest banking organizations in the nation. It provides about 20 percent of the government’s funding, with the remainder coming from the Treasury’s sale of gilt-edged securities. In a country with a population of 60 million, NS&I claims up to 30 million customers.

While it does not have a full line of banking products and services, NS&I competes head to head in some arenas with private financial-ser- vice companies like Barclay’s and Abbey National Bank, as well as the UK building societies. It offers a range of savings products, from traditional individual passbook accounts and guaranteed income bonds to innovative products like guaranteed equity bonds and Premium Bonds. NS&I is the only savings institution in the UK that offers individuals the opportunity to win up to 1 million ($1.66 million) in prizes, tax free, without putting capital at risk.

Competition in the financial services industry goes beyond the established banking companies. Major UK food retailers like Tesco, J. Sains- bury, and Safeway threw down the gauntlet by setting up financial service centers in their supermarkets beginning in the mid-1990s. Not content simply to lease space to a banking partner, these companies branded their own products, built on-line banking capabilities for their customers, and offered a full line of appealingly priced products. In addition, a new entrant, Virgin Group, recently began soliciting entire banking relationships by offering a comprehensive account that consolidated loans, mortgages, cash, and savings in a single flexible account. For NS&I to succeed and continue to fulfill its mission, it has to compete aggressively on both product innovation and pricing.

^[*]British pounds converted to U.S. dollars at a rate of 1.664 dollars per pound.