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Financial-Services Firms To Double Offshoring In Three Years: Survey

Low-value IT activities such as infrastructure management already are being sent offshore by 42% of those surveyed, with another 17% to do so during the next three years.
Financial-services firms are expected to double the number of jobs located offshore within the next three years as they attempt to reap cost savings, according to a survey released Thursday By PricewaterhouseCoopers.

The survey of 156 senior executives in the financial-services industry shows that a quarter of the survey participants now offshore between 10% and 20% of their employee workforce; that's expected to rise to nearly half in three years.

Cost savings was cited by 79% of participants as the most important benefit of offshore outsourcing, followed by strategic flexibility (33%) and greater focus on core competencies (28%).

Lower-value IT activities such as infrastructure management are being sent offshore by 42% of the survey participants, and another 17% plan to offshore such activities within the next three years. Higher-value activities such as applications and services are being sent offshore by 34%, with another 23% planning to send those tasks offshore in the next three years.

The trend is toward transferring more higher-value operations offshore, especially to countries such as India and China. ABN Amro earlier this month tapped five vendors for its most strategic IT work -- application development. ABN Amro will contract with Accenture, IBM, and Indian firms Infosys Technologies, Patni Computer Systems, and Tata Consultancy Services as preferred vendors for app-development services.

The offshore operating model of choice is the captive venture -- an operation that's majority-owned by the offshoring institution. This preference is most marked for activities such as financial research and modeling that require a degree of specialist knowledge, involve confidential information, or relate to core activities. Such activities are more than four times as likely to be outsourced to a captive operation than to an independent vendor.