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Steven Marlin, InformationWeek
Steven Marlin, InformationWeek
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Financial-Services Firms to Double Offshoring in Three Years: Survey

Low-value IT activities such as infrastructure management already are being sent offshore by 42 percent of those surveyed, with another 17 percent to do so during the next three years.

Financial-services firms are expected to double the number of jobs located offshore within the next three years as they attempt to reap cost savings, according to a survey released by PricewaterhouseCoopers.

The survey of 156 senior executives in the financial-services industry shows that a quarter of the survey participants now offshore between 10 percent and 20 percent of their employee workforce; that's expected to rise to nearly half in three years.

Cost savings was cited by 79 percent of participants as the most important benefit of offshore outsourcing, followed by strategic flexibility (33 percent) and greater focus on core competencies (28 percent).

Lower-value IT activities such as infrastructure management are being sent offshore by 42 percent of the survey participants, and another 17 percent plan to offshore such activities within the next three years. Higher-value activities such as applications and services are being sent offshore by 34 percent, with another 23 percent planning to send those tasks offshore in the next three years.

The trend is toward transferring more higher-value operations offshore, especially to countries such as India and China. ABN Amro earlier this month tapped five vendors for its most strategic IT work -- application development. ABN Amro will contract with Accenture and IBM, and Indian firms Infosys Technologies, Patni Computer Systems and Tata Consultancy Services as preferred vendors for app-development services.

The offshore operating model of choice is the captive venture -- an operation that's majority-owned by the offshoring institution. This preference is most marked for activities such as financial research and modeling that require a degree of specialist knowledge, involve confidential information or relate to core activities. Such activities are more than four times as likely to be outsourced to a captive operation than to an independent vendor.

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