Financial services companies could treble savings offshore - Deloitte

Deloitte survey finds financial services companies not fulfilling cost saving opportunities offered by offshore operations. Financial services companies are capturing less than one-third of the potential cost savings offered by offshoring operations, according to a survey by Deloitte.

Deloitte said its survey of 62 global financial services institutions dispelled the myth that the majority of offshoring involved call centre jobs. '90% of offshoring investment is activities such as HR, IT, processing, finance and administration, with only 10% in call centres,' said Chris Gentle, Deloitte's director of financial services.

The study found that high performing financial institutions offshore 6.7% of their global headcounts, well ahead of the average 3.5%. Deloitte said that if all surveyed companies that offshore were to reach this ‘best practice’ headcount then they could reduce their collective annual cost base by $16bn (£9.3bn) more than tripling their current reported savings of $5bn.

Deloitte also found that UK financial services firms are achieving higher cost savings through offshoring than their global counterparts, with average cost savings of about 47%. This is some 10% higher than the global average. UK organisations also offshore an average of three functions, and most are rapidly increasing their offshore headcount.

India remains the dominant offshore location, with 100% of respondents having an Indian presence. Some 40% of UK operators have a second centre in a location other than India, including China, Canada, South Africa and Singapore.

Deloitte argues that globally too few financial services companies are fully committed to entering into outsourcing arrangements. Chris Gentle, director in financial services at Deloitte and author of the study, said: 'Offshore operations that aggressively expand their scope and scale typically deliver much higher returns.

'Financial institutions that make a half-hearted attempt at offshoring are exposed to all of the risk, while enjoying only some of the benefits. The message is clear: don’t dabble – stay home if you’re not committed.'

'However, offshoring is not a straightforward cost savings tactic. Many organisations are beginning to experience 'offshore fatigue', as the initial novelty wears off and the original operational managers return from their tour of duty.'.

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