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Offshoring is forecast to double in three years

Offshoring in the financial services sector is set to double by 2008, says consultancy PricewaterhouseCoopers.

The firm’s research, Offshoring in the Financial Ser- vices Industry: Risks and Rewards – shows that 25 per cent of financial services companies outsource between 10 and 20 per cent of their workforce but this is expected to reach 50 per cent in three years.

Asked what the three main reasons were for offshoring, cost saving came top with 79 per cent followed by improved quality of service and greater focus on core competence, both with 34 per cent.

In the longer term, 74 per cent of financial services companies saved costs by offshoring, although in the first year 32 per cent of firms saw an increase in costs and after five years 15 per cent still saw no change in costs.

In terms of risks, deteriorating quality of service and cultural differences both came top, with 41 per cent, followed by attracting people of the right quality, 27 per cent, and cost overruns, 26 per cent.

The research reveals that 22 per cent of organisations believes that knowledge- based activities will be offshored by 2008.

For 46 per cent of financial companies, the biggest barrier to offshoring higher-value activities is confidentiality and privacy concerns.

This is followed by insufficiently skilled offshore staff on 39 per cent and insufficient understanding of the core business in offshore locations on 37 per cent.

Chairman of global financial services leadership team Jer- emy Scott says: “Financial services executives, who are looking to reap the rewards, need to view offshoring as a long-term process to improve performance in the organisation as opposed to a cost-cutting mechanism.”

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