Increased
offshoring augurs well for India: Capco- LBS joint study
22 May 2006
Bangalore:
The financial services industry is going down the same
offshoring and outsourcing route pioneered by the manufacturing
industry according to new research findings conducted
jointly by Capco and the London Business School.
According
to the survey's authors, Dr Phanish Puranam, assistant
professor at London Business School Dr Suresh Gupta,
head of sourcing at Capco, the results of this offshoring
and outsourcing in financial services for Indian companies
and employees could be continuing rapid growth in opportunities
— and not just in call centres and transaction
processing.
Financial
services is one of the most important industries in
both the UK and the US and is one of the biggest employers,
but it has historically lagged behind manufacturing
industries in exploring the opportunities of outsourcing
and offshoring — key components of what are known
as "global sourcing models".
This new and in-depth research, was presented at the
Indian School of Business (ISB), Hyderabad, last Friday,
May 19. It explores the experiences and sourcing strategies
revealed by 62 executive respondents from the world's
top financial services organisations.
The
authors have identified a growing willingness to outsource
and offshore more complex and multi-process activities
and have dispelled many of the myths surrounding outsourcing
and offshoring in the financial services industry today.
Some of the key findings of the research are as follows:
-
The
'global sourcing model' is well established amongst
the world's leading financial services organisations
even for "vertical business processes" often
assumed to be too difficult to outsource or even offshore.
Indeed, 58 per cent of survey respondents who outsource
business processes already use alternative sourcing
strategies for these vertical processes.
-
These
companies no longer think about "whether to outsource"
or "whether to offshore" in terms of single
functions and a single vendor; instead they are beginning
to manage sophisticated sourcing frameworks that integrate
multiple-vendors, multiple-geographies and vertical,
business specific processes. Nearly 25 per cent of
the respondents reported that they already use a combination
of resources onshore and offshore, in-house and outsourced.
-
While
cost savings continue to be the dominant motivation
for the transition to global sourcing models, other
factors are emerging as important drivers; over 40
per cent of respondents cited quality improvements
as a key objective while 25 per cent cited increased
flexibility as a priority, especially in outsourcing.
-
Experience
confers sophistication; the more experienced among
the survey respondents outsource and offshore more
challenging processes, report experiencing fewer hidden
costs, claim to manage multiple sourcing models with
fewer difficulties, and report more effective collaboration
with their suppliers.
-
Respondents
are not overly deterred by the spectre of 'negative
press' when offshoring — among the top 10 potential
obstacles to offshoring, this factor appeared as only
the 9th in the list — only 8 per cent of the
respondents cited negative press as a "very significant
factor" in making offshoring decisions.
-
The
most significant management challenges in global services
sourcing are often at the operational level. Good
project management capabilities were cited as the
single most important ingredient to a successful global
sourcing capability. In ongoing research at London
Business School, Dr Puranam is studying project management
capabilities in offshoring services.
at
a seminar hosted by the ISB Dr Puranam, who co-authored
the analysis of the survey, said, "The survey highlights
that financial services companies are finally adopting
what can truly be described as a 'global services sourcing
model'. They are doing what the manufacturing sector
did years ago, breaking up the supply chain and breaking
free of geographical and organizational boundaries."
Capco's Dr Gupta, the other co author, added, "Despite
the myths and media headlines surrounding offshoring,
the leading financial services organisations are already
far along the path of implementing sophisticated Global
Sourcing Models. It is no longer a question of whether
to outsource or offshore a generic process like IT maintenance;
instead they are already moving complex, business-specific
processes offshore."
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last year. The School's executive education department
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