PWC survey: Financial services firms looking offshore

16.09.2005
Von Patrick Thibodeau

Financial services firms expect to double offshore use by 2008 despite widespread dissatisfaction because of cost overruns, difficulties in recruiting and training staff in India and cultural differences, according to a study released this week by PricewaterhouseCoopers LLP.

Nigel Vooght, a London-based capital markets advisory leader at PWC, said that many of the problems reported by executives in the survey generally occur in the first year or two and should iron out as companies improve their business and IT processes. PWC surveyed executives in IT and business roles at 156 firms worldwide and found that about a quarter of the companies send 10 percent to 20 percent of their head count offshore in the business process and IT areas.

In three years, PWC estimated, half of those firms will be offshoring.

"There is a lot of demand from a lot of players for the trained and educated resources," said Vooght, adding that companies working offshore are developing more Western-like approaches to retaining employees, such as improving benefits.

The annual survey focused on financial firms that run so-called captive centers, which are offshore facilities managed by the company. Financial services firms have been hit by high competition for skilled personnel in these countries, which is pushing up wages, said Vooght.

He went on to predict that labor market difficulties will likely push some companies to set up operations in countries other than India, such as the Philippines, which is becoming popular because of the availability of accountants there. Some financial services firms may also move to offshore outsourcing providers as a way to deal with labor market and other issues, he said.

PWC"s survey findings about dissatisfaction with offshore outsourcing dovetails with results released by Chicago-based DiamondCluster International in June. DiamondCluster surveyed 210 senior IT executives at Global 1,000 firms and 242 executives at outsourcing service providers. It found that the number of users satisfied with offshoring providers fell from 79 percent to 62 percent.