Global Financial Services Offshoring - India holds 4/5th of the market

Source: Offshoringtimes

Offshoring in the financial services industry has happened much faster than anyone predicted with India accounting for four-fifths of the global market, a report has said.

A study based on global financial services institutions reads "That India holds around four-fifth of the global market. It is quite surprising that offshoring in financial services has developed so faster than expected. The report says that India has been gaining market share from established centres such as Ireland, Canada and China. The closest contender appears to be the Philippines.

However, there are some doubts been raised from certain quarters weather India will be able to keep hold on this success trend, because it might complicate in future. The demand for skilled workers increases pressure on wages, will have an impact on India service providers.

The report predicted that by 2010, more than one-fifth of the overall industry cost base will have shifted offshore. The present numbers are astounding. In the year 2003 it recorded an increase of 46 per cent in the number of financial institutions with offshore operations, while the number of offshore jobs grew by 500 per cent."

"This implies cost savings of more than $150 billion, a massive boon for the biggest firms, whose economies of scale tend to make them the predominant practitioners of offshoring."

It is, of course, vital, said the report, that firms get offshoring right. Managers need to make the right offshoring decisions based on careful analysis of three main factors. The second is to buy or build. In the early days of offshoring, many firms outsourced offshore capabilities. In other words, they bought them, just as they would buy any off-the-shelf product or service. Increasingly, however, firms now seek to build capabilities themselves, retaining ownership and control of a captive arrangement via a wholly-owned subsidiary, the report said.

Another model growing in popularity is build-operate-transfer (BOT), in which a hired vendor gets an offshore operation running smoothly before handing it over to the financial institution, it added.

The third factor is to decide to optimise now or later. Ambitious firms use the shift to offshoring as an opportunity to improve business practices and processes. But this can be risky. Many firms prefer to move their processes as they currently stand , putting off the effort to make improvements until the transfer operation has been successfully completed.

"Significant though these challenges are, however, "the potential gains make offshore one of the most compelling competitive forces in the history of the industry.