It’s likely that in this global climate, the incidence of outsourcing and offshoring will increase in a bid to maintain service efficiency and cut costs.
However, there is some conflicting debate within the press of what the outsourcing market is set to do, especially when focusing on financial services. It has been reported prominently in the IT press that the Lloyds TSB Group Union (LTU) has been urging the bank to return offshored jobs back in-house.
After such a significant merger/acquisition as the Lloyds TSB and HBOS, organisations involved usually with these large scale mergers have enough to cope with initially standardising systems and integrating workforces, without focusing on terminating offshored contracts.
Lloyds TSB is one of the leaders in outsourcing and will think very carefully before bringing any outsourced contracts back in-house and then they will base any decision on business strategies. However, there is always the possibility that HBOS has an on-shored contract that LTSB could use and that may well present an opportunity.
Although the financial services market is experiencing one of the worst shake-ups in quite some time, it is doubtful that there will be a huge surge in the termination or non-renewal of outsourcing contracts. What may happen is a slowdown in ‘mega-deals’.
There is a large initial cost involved in any outsourcing contract. If that cost is high, as it usually is with mega deals, then banks will almost certainly be hesitant. However a long-term outsourcing deal that has been running for some time will invariably continue to run, as the initial cost has already been dealt with and the continuous savings are too appealing.
Even the US government, which is under continuous pressure to reduce offshoring, is finding it exceptionally difficult to deter organisations from the appeal of offshored contracts.
Over the years the appeal of outsourcing for improving quality of service and seeking innovation has grown significantly. However ultimately, in a time of economic downturn, outsourcing and offshoring contracts will be about cost saving and this will be the short term priority for most companies.