Cost savings are not the only factor to consider when offshoring

The number of jobs transferred offshore by insurers and other financial services companies is expected to rocket in the coming years, according to a recent survey by Deloitte.

But another study has shown that the advantages to banks and insurers of using offshore call centres may be diminishing.

According to Deloitte there are currently 50,000 UK financial services jobs overseas and this figure is set to grow to 87,500 by 2012. Insurance jobs, however, make up just 17.5% of this total, said the firm.

But while cost savings can be considerable from offshoring – Deloitte reckons insures have obtained average savings of 43% - companies are starting to look beyond cost cutting as the only factor. Service is an issue.

National Outsourcing Association said: “Organisations are now searching for the right answers rather than the least expensive solution when it comes to offshore outsourcing of call centres.”

Chris Gentle, associate partner, financial services, Deloitte, added: “If the quality of service falls, even if you cut costs, then it just doesn’t make sense to outsource.”

Other research from Compass management Consulting, however, finds that wage cost rises of up to 15% a year in markets such as India are reducing the cost benefits of overseas centres.

While India remains the prime location for offshoring it could be at risk of losing its spot as the jewel in the outsourcing crown.

China’s share of offshored labour is already rising. One third of financial institutions now have back office (mainly IT) processes in China, said Deloitte.

The firm also said that China’s growing competitiveness may dampen salary inflation among Indian offshoring industry workers.

Other offshoring options include South Africa, which has recently trumpeted itself as a prime venue.

The countries inward investment agency recently said: “Employment in Cape Town’s call centre and business process outsourcing industry had grown by 41% to over 22,000 since 2005.”

Both Uganda and Ghana are trying to set themselves up as IT development centres, not to mention those parts of Europe which have been embracing the opportunities presented by a more open market.

It’s the retail and investment banks, with advanced global processing capabilities, which have so far become sophisticated in choosing a number of offshoring locations, asserted Gentle. While generally speaking insurers have yet to be as adventurous.