$240 million European offshore outsourcing opportunity

$240 million European offshore outsourcing opportunity

Over the next two years, offshore outsourcing in European financial services will create a market opportunity in excess of $240m for IT vendors, according to forecasts from analyst group Datamonitor.

The research, based on interviews with 150 European financial institutions from seven countries, estimates a compound annual growth rate for offshore outsourcing of 18% between now and 2005, as banks begin to move bigger chunks of their core back office processes to lower-cost centres overseas.

Datamonitor's survey reveals that UK institutions are most receptive to offshore outsourcing overall, with 29% of respondents saying they are actively considering it and a further 14% indicating they are likely to use it in future. Nordic institutions are also open to outsourcing with one in four respondents actively considering it.

German institutions are the most sceptical, with over 90% of respondents unlikely to consider an offshore outsourcing deal. The southern European markets also express reluctance, mainly as a result of existing low IT labour costs at home.

Difficulties communicating with the outsourcer is by far the most common concern regarding offshore outsourcing, cited by 70% of respondents overall, with loss of control mentioned by a further 29% of the sample.

Datamonitor believes these fears play into the hands of the larger, established players who can marry onshore capabilities with offshore capacity to achieve global fulfilment.

Anders Maehre, financial services technology analyst at Datamonitor comments: "With global networks and fulfilment capabilities and the ability to exercise a smart or flexible sourcing strategy, the onshore global vendors are ideally placed to address (financial sector) concerns."

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