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Jayan CM With the global acceptance of India as a financial services outsourcing hub, major financial companies are joining the offshoring bandwagon. Banking giant Credit Suisse announced its plans to set up its centre of excellence in Pune by January this year. Another US-based financial company State Street is on the verge of setting up its support centre in Pune as well. Gradually India is being seen as a market, which can offer high-end and mission critical support services. Functions being offshored have graduated from the support functions such as F&A support and voice based services to complex functions including financial modeling, equity research support and portfolio tracking. In fact over the last two years research and analytics has emerged as a service area that has picked up steam.
The growing maturity of vendors, functions with increasing complexity are being offshored. For instance, Credit Suisse has tied up with Wipro to set up the COE, where the vendor will provide the necessary IT and basic operations support. State Street has a tie up with Syntel.
More and more global investment banks are getting their number crunching work done in India. Cost still remains the predominant driver for most of the global financial institutions to outsource services to India. Companies have been able to realize cost savings to the tune of 30-50 percent. According to a study conducted by NASSCOM, American BFS companies saved USD 6 billion in the last four years by offshoring to India. Other crucial factors driving offshoring to India include regulatory compliance requirements, large-scale availability of skilled personnel; English speaking capabilities and favourable cultural issues.
They are doing that through different models of outsourcing that are in vogue currently in the market. While captive and the third party models are being traditionally followed, financial service companies are constantly experimenting with new models and their innovations are likely to drive BPO sourcing as a whole in the country. The latest to emerge is hybridisation of sourcing models that calls for multi-locational sourcing as well as combination of captive, third party and joint venture sourcing models.
There are around 30 global financial service providers with captive set ups in India. These include players like HSBC, AXA, Citigroup, Deutsche Bank and ABN Amro. Top tier investment banks including Goldman Sachs, Lehman Brothers and UBS also have captive centres in the country. Setting up of a captive centre and the related infrastructure and manpower management involves significant financial outlay. Hence typically only the larger players aggressively follow the captive model.
For many others, offshoring volumes are currently not large enough to make captives viable. This springs opportunities for the third party service providers. There are more than 50 large and small third party players catering to the requirements of the BFS clients globally. Some of the big players in the country include Genpact, IBM Daksh, ICICI Onesource, WNS and Wipro BPO. There are some smaller niche service providers including Amba Research, Irevna and Copal Partners that have captured the high-end research and analytics work.
Going forward, global sourcing that follows a best-of-breed approach will find greater acceptability as firms adopt a multiple-model, multiple-vendor and multiple-location approach. Blended or hybrid models will be the preferred model for financial institutions. With almost 50 percent of the worlds biggest banks in terms of asset size are offshoring to India; the country remains the most preferred offshoring destination. However, India faces stiff competition from emerging hubs in Asia Pacific and Eastern Europe. Despite such stiff competition, India will retain its dominant position at least for the next couple of years.
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