The top 15 global financial institutions will increase IT spending on vendor-direct offshore outsourcing by 34% annually, representing an increase from $1.6bn in 2004 to $3.89bn in 2008, according to research by TowerGroup.
Despite the recent political backlash against shifting work overseas, TowerGroup says most of the top 15 global financial institutions are already outsourcing some parts of IT offshore.
The research also suggests that as well as reducing IT budgets and cutting jobs offshoring will be used strategically for the redeployment and retraining of key resources to meet more critical business objectives.
Virginia Garcia, senior analyst in the financial services strategy & IT investments practice at TowerGroup, insists that despite the current political debate, offshoring makes good business sense and US companies are realising the business benefits from outsourcing IT and business processes to both overseas captive sites and third party providers.
Recent political debates on outsourcing have tended to focus on customer-facing business processes like call centres. Earlier this month US card issuer Capital One terminated a telemarketing contract with Indian call centre operator Wipro Spectramind after call centre staff deliberately mislead customers during sales calls. TowerGroup admits that call centre outsourcing leaves no room for error and suggests that firms look first to offshoring back office processes rather than starting with more "public" front-office services.
TowerGroup says one of the most compelling arguments against offshore outsourcing is the possible gap in security and stresses that this should be made a top priority along with disaster recovery.
Garcia adds that that if outsourcing is executed properly, maintenance costs will go down and more money will be available to innovate.
"Firms that do not view offshore outsourcing as an opportunity to do more not less are missing the boat," she says.