Financial Services Firms Offshoring Strategies Driving Growth in India

The concept of offshoring can either be a blessing or a curse for a company, depending upon the industry in which the company operates. For the banking industry, it is translating into growth in the Indian market. While this is a positive trend for Indian vendors, it is still questionable as to the overall consumer perception.

 

Barclays, National Australia Bank (NAB) and ANZ all recently announced that they would be sending more of their work to India in what has been called strategic moves by all three institutions. For Barclays, the move was part of its globalization efforts, while NAB was driven by its massive technology transformation program. ANZ was seeking to increase efficiency.

The Indian contact center market has felt the impact of the slowdown of the American economy as the U.S. is its largest market. Those Indian vendors affected are mitigating risks by expanding into new market regions including Australia, New Zealand and Europe.

According to a recent Deutsche Bank report, in the European finance market, restructuring dominates the list of reasons for offshoring and roughly 10 percent of job cuts were due to offshoring. Of those services that have been offshored, the four most popular were software development, business process outsourcing, call centers and accounting.

 

This study also found that of the banks in Europe, 32 percent of the IT workforce and 38 percent of the support staff work overseas. Roughly 41 percent of the wok that is offshored to India is by financial services firms. In addition, 50 percent of all retail banks throughout the world are seeking to offshore at least part of IT functions over the next five years.

Experts in the field warn that those companies that seek to offshore for the sake of reducing costs must remember that such benefits take time to realize and costs can in fact go up during the initial period of offshoring. On the flip side, offshoring does help the economy and improves job prospects.

Europe continues to be the fastest growing market for outsourcing vendors in India and is expected to be a key consideration of all strategic decisions. Companies are continuing to strive for a mix of in-house and offshoring in an effort to maximize cost benefits and efficiency.

 

As the U.S. continues to face an uncertain economic future, vendors in India and other offshore locations will increasingly change the focus of their growth strategies by turning to other markets. The resulting impact on the global market could be years in the making, but will likely put a new competitive bent on India resources, changing the overall appeal of the market.