Offshoring spreading ever faster

A report by auditors and business consultants group Deloitte notes a strong global trend toward the offshoring (that is, transference) of activities of the big groups in the financial sector to low-cost countries and foresees a spreading of the practice among smaller companies. According to Deloitte, the number of such groups that joined the trend grew 46 percent over the last year, and in the next six years, more than 20 percent of the global cost of financial organizations is projected to be transferred to countries other than their base. With the resulting average financial gain per offshored activity estimated at 37 percent of the initial cost, outsourcing is well set to become a major element in the global search for competitive advantages. Smaller financial companies would aim at gaining competitive advantages in the niche market segments in which they tend to specialize. This process has already begun in Greece: For instance, the National Bank of Greece has offshored the maintenance of its software to a company in India. Deloitte’s managing director in Greece, Michalis Hatzipavlou, is surprised at the speed at which outsourcing is growing. «Before the study was launched we predicted that the offshoring of activities will change the face of the global financial sector in the next five years. A year later, we can say we never expected this transformation to take place so fast. We estimate that the number of new jobs in the sector in low-cost countries grew almost five times in 2003,» he says. The most popular destination for transferred activities continues to be India, which accepts about 80 percent of those offered. The main reasons are the significantly lower labor costs, human skills and strong culture. The Philippines and Malaysia follow in popularity, which has grown at the expense of Ireland’s and Canada’s in recent years. Deloitte warns that the offshoring of internal processes yields significant advantages only when done properly. Planning takes four to five months and the transfer itself between three and six. The investment is written off in one to two years and this is expected to be shortened in the near future. The Deloitte study, under the title of «The Titans Take Hold,» was based on interviews with senior staff from 43 financial organizations (including 13 of the world’s 25 largest by market capitalization) in seven different countries. In Greece, Deloitte is active through two companies, Deloitte Hatzipavlou, Sofianos & Cambanis and Deloitte & Touche Consulting, and employs about 300 staff in Athens and Thessaloniki.