In an increasingly interconnected world, large financial services institutions (FSIs) are already sourcing their IT and business process services from a variety of international locations. As outsourcing services have evolved from filling tactical gaps to providing strategic cost and quality advantages as well as innovative features, FSIs are tapping supplementary alternatives to India as a location for offshore outsourcing.
FSIs are sensitive to the political controversy surrounding offshore outsourcing and are reluctant to relinquish control to countries with patchy intellectual property protection. Therefore, they handle offshore work in such locations via a captive outsourcing model whereby they own the operations.
The Chinese government, foreign investment and a large domestic FSI market are fuelling China’s offshore outsourcing potential. TowerGroup estimates that this market will grow 73% annually between 2004 and 2008, mostly in the area of IT.
Guillermo Kopp is director and Virginia Garcia is a senior analyst, financial services strategies & IT investments, at TowerGroup.
