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Commentary

Rethinking the In-House Data Processing Paradigm

Outsourcing is not the only way to relieve your IT workers of mundane, repetitive tasks.

By Kathy Hooker Burress | Updated on November 24, 2015
For decades, it was practically chiseled in stone. Smaller credit unions gravitated toward a service bureau (a.k.a. outsourced) data processing model, while larger credit unions favored in-house processing. In-house processing carries higher up-front costs and is more labor-intensive over time, so it makes sense that institutions that can pay more would be willing to pay more. In exchange for that extra effort and expense, these larger credit unions were able to exercise a level of control over their data processing environments that simply wasn’t available from a service bureau.

Fast forward to the last few years, and we see an increasing number of larger credit unions migrating to one flavor or another of outsourced data processing. They seem willing to give up the control afforded by in-house processing for the benefits, real or perceived, of service bureau processing. When I ask credit union IT executives what accounts for this shift in thinking, the three benefits of outsourcing that I always hear are: Lower compliance burdens, more predictable expenses and fewer staffing requirements.

The compliance argument seems to make sense at first blush. Move all that hardware from your data center to your core processor’s data center and you’ll be moving a heavy compliance burden out the door, too. But how true is that?

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