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Outsourcing
has been in use, since 1970s, in the financial services
like clerical printing financial statements and storing
records. However, with the advent of information technology
during the 1980s, financial services firms began to
outsource a great variety of IT activities as means
of lowering their costs and gaining faster access to
up-to-date technologies. For instance, accessing software
for producing internal reports and customer statements
from a specialized vendor often provides significant
cost savings and greater flexibility instead of developing
and marinating that software in house. A recent study
by Gartner indicates that enterprises in the financial
services industry have shown a high adoption of outsourcing
process compared to any other industry. According to
the study, overall outsourcing adoption by large enterprises
for administration services like HR, finances, and accounting
administration, payment services etc., are about 20.6%
while it is 36% in the financial services industry.
Other demand management services (like marketing, sales,
customer care etc.,) by large enterprises are 5%, while
it is 8% in the financial services industry. These figures
reveal that the higher the adoption by the companies
in the financial services industry, the better the value
proposition.
Financial
services industry is well-suited to offshore outsourcing
as these services are easier to outsource than material
products because there is physical good flow to be coordinated
with the information flow. Most importantly, outsourcing
has the potential to transfer the risk management and
compliance to third parties who may not be regulated
and who may operate offshore. In many fields of the
industry, business processes are highly repetitive tasks
and can be standardized. Financial services companies
provide a wide array of services to consumers and businesses,
but generally characterized by as securities firms,
insurance firms and banking firms. Though quite distinct
in practice, these activities have several common features
that might dispose them toward large degree of outsourcing. |
