Oliver Wyman's Subbakrishna adds that as more processes are sent offshore, traditionally U.S.-based vendors, such as IBM and Fiserv, increasingly are setting up operations in foreign countries to service clients. And new geographies are arising as well, thanks in part to Indian companies hiring workers or acquiring companies in other parts of the world. Infosys, India's second-largest outsourcing provider, recently opened up a software development center in Mexico. Other Indian firms have opened up operations in China and Eastern Europe. These companies are relying on intermediaries to manage relationships with their offshored operations facilities, Subbakrishna says.
Each of these new regions is developing into an outsourcing hub because each offers unique benefits, Subbakrishna explains. Mexico, because of its time-zone proximity to the United States, is a prime option for business process optimization, IT outsourcing and call center outsourcing, he says. And Eastern Europe has fulfilled a specialized niche for skilled workers with mathematical and science backgrounds who can perform modeling, derivatives production and portfolio risk management.
The Philippines, because of its large English-speaking population, also is emerging as a significant offshore outsourcing force. In June, Charlotte, N.C.-based Wachovia ($706 billion in assets) announced that it would open its first offshore call center, in the Philippines, early next year. The move is part of Wachovia's partnership with Indian outsourcer Genpact, which has operations in the Philippines. The bank declined to comment about the project for this article.
But perhaps the most talked-about offshore alternative to India, according to Subbakrishna, is China. The country's growing population of educated workers has the potential to make China India's main rival for outsourcing services (see Is China Going to Replace India as the Next Offshore IT Hub?).
Not Much of a Debate
Given the obvious benefits of outsourcing and offshoring, the practice has become a part of doing business in financial services. "Four years ago there was a political debate about outsourcing. Nobody is talking about offshore outsourcing anymore because everybody is doing it," observes TowerGroup's Kopp. "It's a moot point. Why argue about it?"
Indeed, when it's saving the financial services industry an estimated $9 billion a year, up from $5 billion a year ago, according to Deloitte & Touche's "Global Financial Services Offshoring Report 2007" why argue about it? More than 75 percent of major financial institutions now have operations offshore, compared to less than 10 percent in 2001, the report notes.
BB&T dipped its toe into offshoring after being urged on by its board members, says the bank's Brannan. "Our CEO views offshoring as a function of the global economy," he relates. "In the end, getting the best things done at the lowest cost is best for everybody."
Brannan's group utilizes offshoring predominantly for IT and programming, he relates. Coding gets completed by a number of different India-based firms, he adds.
The bank also is looking into further opportunities for offshoring and is exploring "anything that can be electronified" or digitized, Brannan continues, noting that BB&T now has a dedicated group that looks for additional offshoring opportunities. "If it takes longer to build something yourself, then [outsource] it," he says, explaining that the labor costs must be low enough to offset the cost of transmitting the data overseas.
Brannan is quick to point out, however, the one thing that BB&T will not send to India -- "There are no client-interfacing services offshore," he stresses.