The outsourcing pioneer Citigroup set up a company in India twenty years ago.



"Offshoring is not just a fad, but the reality of doing business today."

Chris Larsen, Chariman and CEO, E-Loan



"From 2003 to 2004, Deloitte Research found in a survey of 43 financial institutions in seven countries, including 13 of the top 25 by market capitalization, financial institutions in North America and Europe increased jobs offshore to an average of 1,500 each from an average of 300. The Deloitte study said that about 80% of this went to India.

Deloitte forecasts that by the year 2010, the 100 largest global financial institutions will move $400 billion of their work offshore for $150 billion in annual savings. Its survey forecasts that more than 20% of the financial industry's global cost base will have gone offshore in that period (Rai, 2004)."



According to Celent, in 2003 the average . . .

MBA working in the financial services industry in India, where the cost of living is about 30% less than in the United States, earned 14% of his American counterparts wages.

Information technology professionals earned 13%, . . .

while call center workers who provide customer support and telemarketing services earned 7% of their American counterparts' salaries.

"There has never been an economic discontinuity of this magnitude in the history of the world. These powerful forces are allowing companies to rethink their sourcing strategies across the entire value chain."

Mark Gottfredson, Bain and Company



"But cheap labor is not the only reason for outsourcing. Global financial institutions are moving work overseas to spread risks and to offer their customers service 24 hours a day (Rai, 2004.)"



A.T. Kearney Composite Scoring Methodology

Category
Percent % of Total

Country Characteristics

Metrics Used

Cost
40%

  • Cost of labor
  • Cost of managaemnet infrastructure
  • Tax and treasury impact

    		•

  • Blended BPO and IT labor costs
  • Average cost of infrastructure (occupancy, utilities, telecom, management)
  • Corporate tax rates, profit realization, exchange rates

    		•

    Environment
    30%

    • Risk (economic, political)
    • Country infrastructure
    • Cultural compatibility
    • Geographic proximity
    • Security of intellectual property

    • Gauge politcal and business risk, degree of government support
    • Relative strength of infrastructure and investments
    • Cultural differences or compatibility compared to the U.S.
    • Relative distance from the U.S.
    • Relative security of intellectual property

    People
    30%

  • BPO and IT process experience
  • Size of labor market
  • Education level of workforce
  • Language barriers and literacy rates
  • Employee retention

    		•

    • COPC and CM SEI and quality ratings, business process expertise and offshore market share
    • Available total labor market
    • Expected per capital education level
    • Percent fluency in English (overall and select companies), country literacy rate
    • Select company retention and turnover rates

    Resources:

  • Offshoring, A Detour Along the Automation Highway. Celent Communications.

  • Rai, Saritha. 2004. "Financial Firms Hasten Their Move to Outsourcing." New York Times, 16 August. Pp. W1+.