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The credit crunch will generate a new round of outsourcing and offshoring of operations from British financial service companies as their cash becomes tighter. Nearly half of large financers surveyed said they expected to increase their level of outsourcing in the future, according to the Management Consultancies Association. In its report, based on a British Bankers Association members’ poll, the MCA said that outsourcing, and increasingly offshoring, is a normal and acceptable business strategy. Apart from banks which outsource regularly or have already exported their IT resources, insurance and investment houses will lead the “new wave” of outsourcing. However, the MCA, which accounts for 70% of the consulting industry, also said that the confidence inside financial outfits to carry out outsourcing properly was low. Only around half of respondents said their organisation knew how to get good value from outsourcing and less than a quarter said their understanding was up to scratch. Lesley McLeod, a director at the BBA, issued a seven-point check list that organisations intending to outsource, whether offshore or not, should follow to ensure better practice. “Outsourcing is an accepted part of financial services today but… there are still important lessons to be learned in terms of getting the best possible value from such an arrangement.” The associations’ joint-findings suggest that finance and HR outsourcing are not growing any faster than IT outsourcing despite the marketing activity by outsourcing suppliers. Although retail banks emerged as the least likely financer to outsource, IT analysts believe they will focus more on offshore deals, as they seek to do more with the same or less resources. HSBC recently announced that it will be shutting down its Scottish payments processing centre, and credit card firm Capital One cut 750 UK jobs, with offshore replacement planned. “In the past UK banks have slightly lagged in their adoption of business process outsourcing,” said Rajeena Brar, an analyst at Pierre Audoin Consultants. The analyst expects to see more activity in this space: “Horizontal processing services such as payroll will be increasingly outsourced, with strategic business processes (e.g. mortgage and loans processing) being more seriously considered.” But the traffic is likely to be two-way, PAC said. “Offshore players are trying to penetrate and establish presence onshore to meet local needs. “For example, Cognizant is opening an IT development facility in Canary Wharf this year. With BPO booming in the Insurance industry, IT services players are hoping that the banking sector will follow suit particularly as they become increasingly vulnerable to market pressures. “No doubt that the increased competition and offshoring will put pressure on prices, making outsourcing ever more attractive for businesses who need to address cost issues and focus on maintaining business in an ever more volatile market.” In a positive show of support for the controversial process, 89% of financial firms do not think jobs in their organisations have been lost as a result of offshore outsourcing. In line with findings from the academic world, two out of three firms went one better, and said they think outsourcing, regardless of its form, has made their business more competitive. Jun 17, 2008 Email this article Printer friendly page Previous Page
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