According to the latest Global Financial Services Offshoring Report by Deloitte offshoring is saving the financial services industry an estimated £4.5bn a year, compared to £2.5bn a year ago. This is being fuelled by higher foreign headcounts.
The UK financial services industry alone now saves up to £1.5bn a year from offshoring.
The industry’s savings have risen exponentially from around £250m globally in 2003, as the average number of staff employed offshore has increased from 150 to 2,700 in just four years.
Over the last year alone, this has led to the average proportion of group headcount in lower cost countries doubling from 3% to 6%.
Over 75% of major financial institutions now have operations offshore, compared to less than 10% in 2001.
UK and US banking and capital market institutions are leading this shift, but mainland Europe is showing increasing interest.
Deloitte’s research finds that more than half of all financial institutions are now saving more than 40% against their onshore costs for every business process offshored. In 2004, the figure was just 32%.
Chris Gentle, associate partner of financial services at Deloitte, said, “Offshoring is maturing at a rapid pace but, in future, the best offshoring strategies will not, and cannot, be based on labour arbitrage alone.
“Financial institutions need to re-engineer business processes, or risk simply transferring offshore the legacy inefficiencies of older, onshore processes.”
Financial institutions offshoring one or two business processes are saving 20% less, on average, than companies with over five business processes offshore.
Deloitte: Global Financial Services Offshoring report >>
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