U.S. financial services firms are planning to relocate more than 500,000 jobs overseas-more than 8 percent of their workforce-over the next five years, according to a survey of several hundred executives by A.T. Kearney, a management consulting firm.
Nine out of ten respondents cited cost reduction as a reason for moving jobs overseas. Other reasons cited were improved productivity, enhanced service, increased capacity and expanded skills.
While the trend toward offshore relocation has accelerated in recent years, the effectiveness of these moves is far from certain. Half of the respondents classified the results of their offshore initiatives as either "somewhat effective" or "too early to tell." "It's not a slam dunk. There are a number of obstacles to address," said Andrea Bierce, managing director at A.T. Kearney. In China, for example, concerns exist over the protection of intellectual capital.
Nine out of ten respondents listed India as their country of choice for relocating jobs. Although Canada is viewed as having the better business climate, companies are attracted by India's low wages and well-educated, English-speaking labor force. A call center agent in India earns about $2,700 annually.
LiveBridge, a Portland, Ore.-based call center management company, has opened an 800-seat call center in Delhi, India. The three-story, 75,000-square foot facility is completely integrated into the company's North American operations, including Web-based access to call statistics, skills-based call routing, integrated voice response, instant credit decisions and live operators. Employees undergo a four-week training program that includes English accent enhancement, business language, customer service and telesales.
GE Capital has moved close to 20,000 jobs to India since 1997. Citigroup has relocated 3,000 jobs to India, including back-office processing for banking products such as trade, loans, cards processing, cash management, plus customer-care activities, both inbound and outbound. The activities are managed by e-Serve, a five-year-old company that's half-owned by Citigroup. Although its call center operations have been concentrated on serving the Indian domestic market, e-Serve last year opened an international call center in Mumbai to serve Citigroup operations overseas. The company maintains dedicated leased lines to Citigroup's telecommunications centers in Asia and Europe.
Other banks that have relocated large numbers of jobs overseas include Standard Chartered, HSBC, Deutsche Bank and JP Morgan Chase. "The leaders are the companies that already had a domestic presence," said Stefan Spohr, principal in the financial institutions group at A.T. Kearney. "So it wasn't a huge leap of faith to set up offshore operations."
But the offshore relocation trend isn't limited to global banks. "We're now seeing the next wave that includes organizations like GreenPoint Mortgage," said Spohr.
GreenPoint Mortgage last year tapped Progeon, an India-based business process outsourcing company, to provide back-office mortgage services. As part of the contract, Progeon established an Extended Process Operations Center in Bangalore, India, dedicated to maximizing efficiency for GreenPoint through business redesign and technology.
Although offshore job transfers have traditionally involved back-office functions like data entry, contact centers and transaction processing, there has been a shift toward higher-end functions like financial analysis, research, accounting, HR and publishing. "We're not talking call centers anymore," said Bierce. "We're seeing the switch to more white-collar jobs."
Cost reduction 93%
Enhanced service 42%
Increased capacity 39%
Expanded skills 30%
*Percentages of survey respondents
Source: A.T. Kearney