Financial Services Outsourcing Part.IV

In this sector, the European countries was the precursors, and the Asian countries still seem reluctant to take the plunge. AXA only broke the taboo by relocating administrative jobs in Morocco in 2006.

Financial Services Outsourcing Part.III

Finally, the system off shoring is a victim of its success and begins to become engorged: due to the increase in demand for skilled labor, it becomes difficult to find in some countries. In India, for example, the cost increases very rapidly (over 10% per year), and is accompanied by a high turnover rate. This phenomenon is even more expensive than pure wage increase; add an additional cost of human resources management (recruitment, retention, procurement, training etc.). And of course the additional loss of quality will be a resulting one.

Therefore, the experiences of off shoring have not all were successful: once all the parameters taken into account, the cost may be higher than before. Thus, there have been a few years back for some activities. This is what we call the back shoring. Companies repatriate their services or redeem and (re) internalize their local subcontractors to better control activities.

If the financial services sector was not among the first affected by the relocation, it is nevertheless one of the sectors with the greatest potential for relocation because of the importance of back office tasks. Indeed, these positions without customer relations, and often with little added value, are ideal candidates for relocation. And an OECD report respectively class insurance and financial services such as 2nd and 3rd sectors with the highest rate of jobs relocated behind the computer.

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Financial Services Outsourcing Part.II

However, gains arising must of course deduct the additional costs. The first item, identified long ago, is the loss of productivity that is usually relocation. The causes are, among others, a less skilled workforce, the distance of the speakers (producing a greater cost control) and cultural differences. While most of the time, lost productivity is largely compensated by the difference in the cost of labor, other elements may be medium to long term much more consistent and ultimately tip the balance of other side. First, outsourcing often leads to a decline in quality: lack of communication between services, insufficient command of the language, etc.. For example, call centers outsourced most of the time lead to deterioration in customer relations. In addition, the company's image in Western countries may also suffer from outsourcing because it remains a sensitive issue.

In addition, offshore investments are expensive and sometimes underestimated: logistics, communications infrastructure performance, and training not only technical but also cultural to work together both people and especially the reorganization to lead the company. This last point varies greatly depending on the sector and the business relocated. If the offshoring of IT activities or call centers is now pretty well under control, it is still far from mature for most business processes. Not only are more complex processes, but their relocation requires deeper transformations in the organization (thus more expensive), and the creation of new jobs to manage this mode of operation.

Financial Services Outsourcing Part.I

If relocation of activities in emerging countries where labor is cheaper, is a very publicized at this time, it does not, however, a new phenomenon. Off shoring is a long-standing practice. Initiated by the industry in 80 years, this practice was subsequently applied in computing the 90, then return to the call centers recently. Today, off shoring is a major trend affecting many sectors, just as in the Americas and European level. However, behind this movement there is apparently unique practices varied (off shoring, outsourcing, etc.), and mixed results.

First, we must distinguish between off shoring and outsourcing. An activity can be relocated to a distant destination (eg in Asia) is off shoring, to a nearby country (in Eastern Europe and the Maghreb in particular), it is called near shore, or even the same country in the provinces, a practice known as on shoring. In addition, relocation may occur with or without outsourcing. Indeed, the business relocated can be produced by a vendor (external) or within a group entity.

Besides the difference in the cost of labor, constituting the main benefit of course, other drivers may also encourage the off shoring: a higher flexibility and a better quality of service that can run up through 24/24 sites on different time zones, and less state intervention, or a position in new countries promoting local development or purchase of a local company.