Every operations and IT executive knows the dilemma: how to support rising business volumes without allowing costs to grow in parallel. Many have used a range of traditional levers—centralizing shared services, automating transactions, or tapping the global workforce—to reduce labor and transaction costs. Far fewer have taken the comprehensive approach of evaluating the entire operating model they apply to their core processes, with the aim of lowering unit costs while increasing quality and customer service.

By “operating model,” we mean the way people, technology, and processes interact to deliver a common objective, as well as where these resources are located and who owns them (exhibit). The term can be applied very broadly—to a finance function, to a pharmaceutical company, to a university. In financial organizations, it would include processes such as claims underwriting, trade execution, and settlement. In this article, we show how some financial institutions, by rethinking all the elements of an end-to-end process, are beginning to realize enormous benefits compared with others that focus on only one or two elements of the process—such as offshoring certain tasks without considering interactions with technology or potential process improvements.