Two-thirds of banks shun offshore outsourcing

Two-thirds of financial services firms still have no plans to outsource any operations to low-cost overseas countries such as India, according to a new report.

But the worldwide study of 400 IT directors by analyst Datamonitor found those banking firms which have already used offshore outsourcing are planning to increase the scope of it and extend it to more complex and core financial services processes.

Anders Maehre, financial services technology analyst at Datamonitor and author of the study, told silicon.com there is an increasing polarisation in the banking industry between firms which choose to offshore and those that don't.

"The vast majority of companies will not consider offshore for anything. But two-thirds to three-quarters of those who already do offshore plan to increase it, so the logical conclusion is that some of the fears these firms have don't materialise and they do experience benefits," he said.

Only about a fifth of financial services firms are currently using offshore outsourcing and another 15 per cent said they are likely to go down that route in the near future, while the rest said they are "completely unlikely" to use overseas resources, according to Datamonitor's figures.

But the figures can be slightly misleading if not put into context: most of the big global financial institutions make up that small number of firms which are offshoring.

Datamonitor said there is evidence those firms are now looking to extend the scope of their offshore outsourcing to cover procedures such as claims processing and underwriting.

"There is increasing confidence in the ability of offshore markets and the vendor community that serves it. Among the Indian vendors there is an emerging top tier and also the established global service providers have a large mature global delivery network," said Maehre.