Financial service outsourcing to grow, says Datamonitor

The report, "Global sourcing in European and North American Financial Services" is the result of over 400 interviews with key IT decision makers in banks and insurance firms. It finds that while outsourcing has to date been largely limited to function areas such as contact centres and application services, this is likely to change.

"Offshoring of core competencies amongst financial services institutions in Europe and North America is increasing as confidence in the offshore markets – be it via vendor or an in-house offshore operation – is improving rapidly," says Anders Maehre, financial services Technology analyst at Datamonitor and author of the study.

In terms of acceptance and take-up, North America and the UK remain significantly more advanced than the rest of Europe, says Datamonitor. However, Nordic financial service institutions (FSIs) are also increasingly showing signs of embracing nearshore alternatives, such as in Eastern Europe, for certain services.

According to the report, the shift is the result of a growing number of outsourcing service providers and IT services vendors having a credible global delivery capability, an ongoing simplification of the outsourcing process from the FSI point of view and improving industry specific expertise among the service providers.

Datamonitor suggests that FSIs need to develop global sourcing strategies that enable them to choose between operational locations and sourcing set-ups – after weighing up factors such as political and operational risk, regulatory issues, cultural barriers, cost considerations, vendor offerings and local skill sets.

Maehre concludes:

"Offshore outsourcing has gathered tremendous pace in recent years. Political pressure and controversy has done little to deter top-line growth. The improving credibility of many of the offshore providers and increasingly global delivery capability of the leading outsourcing service providers will push FSIs in both North America and Europe towards intelligent use of global resources."