August 30, 2010

U.S. banks are outsourcing back-office processing duties at an accelerated rate, according to a new report from research and consulting firm Marketsandmarkets that estimates that this business will grow from $38.1 billion in 2008 to $67.2 billion in 2015, at an estimated CAGR of 7.6% from 2010 to 2015.

The report also found that IBM and Accenture dominate the bank back-office outsourcing market, followed by HP, Infosys, TCS, and HCL. It concluded that Accenture, Ariba, and ICG Commerce dominate the emerging procurement outsourcing market.

According to the report, in 2009, the banking, financial services, and insurance segment held the largest share – 40% – of the overall U.S. back office outsourcing market. Information technology outsourcing accounted for 16% of the deals finalized in 2009.

Increased M&A activity in the banking space has led to an increase in outsourcing, the firm says, especially as outsourcing to a third-party or a captive center facilitates significant cost mitigation and optimum resource allocation.

The trend of outsourcing jobs from the U.S. has always been a cause of concern for domestic IT service providers. Some U.S. firms are setting up development resource centers in small U.S. towns to create employment within the country while also offering services that can compete in terms of price with the offshore costs.

Vendors have now begun offering on-demand procurement tools, which do not involve software for purchase but are accessible via a secured web link. On-demand offerings thus involve low cost of ownership, fast start-up/implementation, and generally quick ROI, the report states.

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