Onshore and offshore outsourcers’ strategies are converging in competition for FSIs’ business.
Offshore vendors have aggressively captured market share in a period of extreme cost focus in the financial services industry and are increasingly looking to provide new services to sustain this growth. In doing so, the vendors will have to address the primary concerns of European financial services institutions (FSIs).
Difficulties communicating with the outsourcer are by far the most common concern regarding offshore outsourcing. To address these concerns, the largest offshore outsourcing vendors are establishing onshore presences for some proportion of fulfillment as well as sales and marketing, to develop closer customer relationships and provide a more responsive and accountable service. At the same time, several of the onshore vendors are aiming to achieve a global fulfillment capacity to exploit the intrinsic cost advantages of offshore.
The expansion of offshore outsourcing services in the European Financial Services market will continue growing at a compound annual growth rate of 18% between now and 2005. To date the offshore opportunity has been limited to a few areas such as application development and maintenance and, more recently, contact center outsourcing. Going forward, FSIs’ continued focus on cost effectiveness will drive growth in new business process outsourcing (BPO) areas. However, the barriers to offshore outsourcing are likely to affect these new operational services more severely than the traditional offshore services.
Despite the past success of offshore outsourcers, some of the vendors that are best positioned to capitalize on the developing offshore BPO market are in fact some of the top tier onshore vendors. Global networks and fulfillment capabilities and the ability to exercise a smart or flexible sourcing strategy to match customer needs, mean that communications concerns will be much reduced through these vendors, even where they will provide the service from an offshore location.
