Financial firms on track to India

More than a third of Australian financial services firms are on track to embrace offshore information technology and business process outsourcing by this time next year, researcher Frost and Sullivan reports. Banking, financial services and insurance companies are expected to spend $2.63 billion on ITO and BPO by the end of 2010, up from $1.83 billion in 2006.

The trend towards offshore outsourcing in the financial services sector is yet to pay big dividends for India’s highly publicised outsourcing firms. Instead, traditional players EDS and IBM occupy the leading spots in the market, followed by Telstra subsidiary Kaz Group, BPO specialist Salmat and multinational outsourcer CSC. The analyst’s report, Enterprise Outsourcing Opportunities in the Australian Banking, Financial Services and Insurance Vertical 2006-2010, is based on 25 management-level executives in the financial services sector.

Frost and Sullivan senior industry analyst Simon Hayes said the absence of Indian ITO and BPO firms from the top ranks of the Australian financial services BPO market did not mean they weren’t winning business. “We asked respondents to rate by budget, so that doesn’t necessarily mean that they don’t want to use India firms, it just means those firms are not in the top tier by spending,” Mr Hayes said. “The Indian firms are growing very rapidly.” Indian firms still have a long way to go before they rival the sector’s biggest players, EDS and IBM, which have 41.7 per cent and 19.1 per cent of the financial services ITO and BPO market respectively.

Financial services firms also appeared to be more reluctant to give large-scale contracts to Indian firms than they were to outsource IT services and business processes offshore. Twenty-six per cent of survey respondents said they had sent some information technology services and business processes offshore, and another 12 per cent expected to do so in the next year. Mr Hayes said the BPO market was set to grow, but financial services executives weren’t aggressively signing contracts. Instead they were waiting to see the results of business process outsourcing agreements inked earlier this decade. Mr Hayes said Russell Investment Group’s seven-year, $140 million business processing outsourcing contract with IBM, signed early last year, would be closely watched to see if service providers were capable of transforming business processes to make them more efficient.

The Frost and Sullivan ITO and BPO report was released as IDC Australia unveiled the findings of its own BPO survey, sponsored by systems integrator and business process outsourcing player Accenture. The IDC white paper tips that the entire Australian BPO market will increase to $US3.84 billion ($4.66 billion) by 2010, up from $US2.39 billion last year. Finance and administration and human resources services will continue to account for the bulk of the BPO market, the report finds.

“Until recently, Australian businesses tended to view BPO as a cost reduction tool only,” Accenture Australia managing director Doug Snedden said. “Now they see BPO as a way to retire outdated back-office business processes and transform them into responsive and competitive processes that use new technology based on modern, web-enabled applications.” Published By :www.offshoreoutsourcingworld.com.

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