While outsourcing of contact center and application services are relatively established, there is an increasing trend towards core financial services operations being outsourced to alternative locations. The offshoring of core competencies among financial services institutions will continue to rise as major financial companies increasingly take a global view of their resources.
A global sourcing strategy is the dynamic use of distributed global resources in accordance with a balanced view of these issues across financial services institutions' (FSI) functions - not just the offshoring of certain individual tasks.
While the benefits of offshore outsourcing are well documented - lower costs, higher quality to name but two - its use has remained mostly limited to certain 'back office' function areas such as contact centers and application services. While this somewhat immature view remains the primary perception of offshore outsourcing, even in the relatively advanced financial services sector, it is developing rapidly in parallel with the growing acceptance of offshore core services provision.
In terms of acceptance and take-up, North America and the UK remain significantly more advanced than the rest of Europe. However, Nordic FSIs are also increasingly showing signs of embracing nearshore alternatives for certain services.
The current shift, in terms of business process outsourcing sourcing strategies in financial services, is enabled by a growing number of outsourcing service providers and IT services vendors having a credible global delivery capability. This results in an ongoing simplification of the outsourcing process from the FSI's point of view and improving industry specific expertise among the service providers.
FSIs need to develop global sourcing strategies that enable them to choose between operational locations and sourcing set-ups in accordance with their strategic objectives, weighing up a number of factors such as political and operational risk, regulatory issues, cultural barriers, cost considerations, vendor offerings and local skill sets.
Offshore outsourcing has gathered tremendous pace in recent years, and political pressure and controversy has done little to deter top-line growth. The improving credibility of many of the offshore providers and increasingly global delivery capability of the leading outsourcing service providers will push FSIs in both North America and Europe towards intelligent use of global resources.