Introduction

Low cost development centres, otherwise known as offshoring, is a way of describing the relocation by a company of a business process from one country to another such as an operational process. However, in the current economic climate, firms have reputedly been cost cutting and rumours abound that one area affected was offshoring. But the buy-side remains resolute in that it does still see the benefits of offshoring as outweighing the disadvantages.

Key findings

• Current state of the market – While the general consensus appears that the offshore sectors are suffering ever tighter budget constraints, banks are actually still seeing the benefits of offshoring.
• Choice of countries and firms for outsourcing – Firms surveyed for this report mainly outsourced to the East with countries such as India, Singapore, Russia, Brazil, Ukraine and China. Buy-side firms have said that offshore plans have been largely successful. Big name outsourcing players are still very much key to success in this sector. Such firms include Perot Systems, Accenture and IBM among others.
• Acceptability – It is now considered in this sector to be largely accepted and a widely adopted way of doing business. It has generally been popular since the 1990s. However, take up of more complex process in the financial services industry such as finance and accounts have been minimal. This lagging behind can be attributed to the fact that over the last few years financial services organisations have had other priorities such as dealing with changes in accounting practices and regulations such as Basel II, MiFID and Sarbanes-Oxley.
• History – The main reason banks originally outsourced was to reduce their costs and take advantage of the low labour rates, mainly in the East. Banks will trawl across their businesses land operations looking high and low to save costs wherever possible and the outsourcing contracts will be included in any review. It is in this mood of frugality that banks will have no choice but to measure the cost of outsourcing against the cost of bringing services back in-house.

Conclusion

Buy-side firms have suffered from an appalling reputation over the past year and have been cost cutting in many ways with various departments now subjected to stringent budget constraints. One area that some people said would suffer is offshoring. However, firms surveyed have shown that more than ever now is the time to be outsourcing.

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Tagged with: 2009, outsourcing, Technology Research Report