A new report from the Management Consultancies Association (MCA) based on a survey of British Bankers’ Association (BBA) members, has found that the credit crunch will drive a new wave of outsourcing and offshoring in financial services. However, only 54 per cent of respondents felt that their organisation understood how to get good value from outsourcing and only 24 per cent thought they adequately understood the offshoring industry.

Countering some of the negative publicity typically associated with outsourcing and offshoring, the MCA report also found that the majority of respondents (89 per cent) do not think that many jobs in their organisations have been lost as a result of either outsourcing or offshoring and almost two thirds (58 per cent) also think that outsourcing has made the organisation more competitive.

The survey, conducted across over 70 organisations in the financial services sectors, also found that over 90 per cent of financial services’ organisations had outsourced and almost a third had offshored some part of the business and 41 per cent planned to expand their involvement in outsourcing in the near future.

Fiona Czerniawska, author of the report and Director of the MCA Think Tank, commented: “While innovation and creativity is exciting, the credit crunch has also created something of a wake-up call to the financial services sector. Many institutions which have so far ignored the benefits of outsourcing are being forced to revisit it because of financial constraints and liquidity problems. Often they have failed to integrate and are still lumbering under a weight of legacy systems and processes and carrying both unnecessary variable cost and balance sheet assets.”

Apart from a small number of banks that outsource ‘religiously’ and have succeeded in building common platforms for functions like IT and finance, the report found that insurance and investment are ahead of retail banking in their use of outsourcing, with many banks still yet to achieve the standardisation and economies of scale that their size would suggest.

Another source of difference across the financial services sector is the extent to which different functions within the organisation have been outsourced. The survey suggests that finance and HR outsourcing are not growing any faster than IT outsourcing despite the marketing activity by outsourcing suppliers.

Lesley McLeod, Communications Director at the BBA, said: “Outsourcing is an accepted part of financial services today but this report demonstrates there are still important lessons to be learned in terms of getting the best possible value from such an arrangement. We need to ensure the buying side is more informed and better at building more collaborative relationships.”