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Financial services outsourcing: a necessary evil?

21st November 2005
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According to Deloitte, about 180,000 City financial services jobs could be moved to low cost centers located overseas. Despite the prospect that costs savings may be temporary, the consultancy firm stated that the trend is likely to continue. While offshoring has often attracted criticism, it is a necessity for companies to keep in touch with a fiercely competitive environment.

A survey conducted by consultancy firm Deloitte says that, by the end of the decade, 180,000 UK financial services jobs - up from the current base of 25,000 - could move to low-cost centers located in countries such as India and South Africa. The survey, which covers a sample size of 62 global banks and insurers, also states that 20% of financial services cost bases globally, representing an equivalent of two million jobs, could be located overseas in five years' time. Despite the fact that cost savings may be temporary, the consultancy firm expects the outsourcing trend to continue.

Deloitte states that 90% of offshoring activities are in areas such as human resources, IT, processing and finance and the remaining 10% in call center jobs. However, it is the latter which regularly makes the headlines given the prospect of bulk job losses and complaints from trade unions. As an example, Lloyds TSB recently attracted fury from its employees when it announced its intention to employ 2,500 call centre staff in India by the end of 2005.

Improved customer service is often mentioned as a benefit of outsourcing abroad. However, interestingly, Abbey has chosen to move its Indian call center operation back to the UK following growing customer complaints over issues such as a language barrier.

Nevertheless, offshoring is considered by many major firms as a necessity. In today's fiercely competitive world, businesses are forced to find new ways to ensure that they keep abreast of their peers, therefore it is only natural that the outsourcing trend will continue.

More pertinently, despite all the heat and light generated by offshoring controversies, recently-released UK government statistics have suggested the practice has done nothing to dent the country's job market, with employment in IT and contact center roles actually on the rise. While Deloitte's predictions may well prove accurate, the wider impact of the offshoring trend needs to be kept in proportion.

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