Financial firms cut outsourcing

Financial companies worldwide have slashed the number of new outsourcing contracts by a third as they slow their spending.

The world's 20 largest outsourcers reported the fall in contracts being struck by the financial sector during the fourth quarter of 2008, according to Everest Research Institute.

There was also a "sharp rise" in the number of in-house offshore operations centres or "captives" being sold by banks to reduce costs.

Eric Simonson, managing principal at Everest Research Institute, said in a statement: "The decrease in outsourcing transaction activity is primarily on account of deferred spending by large financial firms.

"However, we expect outsourcing and offshoring activity in the financial sector to pick up during 2009."

Overall the number of outsourcing transactions dropped by six per cent compared to the previous quarter.

But actual contract value increased by 11 per cent to $3.5bn from $3.2bn in the previous quarter.