Offshoring increases 38% in a year

Offshoring increases 38% in a year

The number of financial institutions that moved functions to offshore centres has increased 38% from a year ago, according to a survey conducted by Deloitte Research.

Overall, the top 100 global financial services institutions will offshore approximately $210 billion of their cost base, with an average cost savings of more than $700 million by the end of 2005.

Deloitte predicts that more than one-fifth of the financial services industry's global cost base will have shifted offshore by 2010, resulting in an average saving of 37% per relocated process.

Peter Lowes, the US leader of Deloitte Consulting's outsourcing advisory practice, says: "In the last year, we estimate the number of offshore jobs in financial services has increased by a factor of five."

He adds: "Now, for the first time, we're seeing economies of scale becoming a factor and having a direct impact on the top and bottom line within the financial services industry."

The primary destination for financial services offshoring continues to be India, which according to the research, receives approximately 80% of all financial services offshoring activity. The Philippines and Malaysia are leading secondary destinations.

The research also shows that 90% of the companies surveyed have not brought operations back onshore, but more than 50% have contingency plans should they face a serious problem.

Deloitte says initial offshoring activity requires four to five months of planning and three to six months to deploy, but the return-on-investment time frame is estimated to be one to two years - a figure that is expected to diminish with offshore experience and capabilities.

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