KPOs to benefit from Wall Street woes
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The collapse of Wall Street has led to numerous opportunities for the business process outsourcing (BPO) industry, specifically to higher value (KPO) outsourcing providers. The medium-to-long term effect of the US sub-prime and financial crisis will accelerate adoption of global sourcing as financial firms embrace offshoring to cut costs. This is exactly what Dallas-based Everest Research Institute found in its recent study entitled “Global Sourcing in Banking, Capital Markets and Insurance”.
“The Institute predicts business process outsourcing (BPO) from the financial services sector will increase 40 to 45 times the current market size over the next five years, with key drivers of growth coming from cost pressures and the timely advent of more vertical-specific offerings by offshore suppliers,” reports Insurancenetworking.com. With Everest’s research findings, it can be said that the KPO industry will be the ones to benefit from the US economic downturn. The firm projects outsourcing in the financial services sector to reach $145 to $165 billion and offshore BPO adoption in the insurance sector is also projected to grow 12 to 15 times its current market size over the next 5 years. The financial services industry, comprised of banking, capital markets and insurance, accounts for 40% to 45% of worldwide global sourcing.
During such financial turmoil, more and more financial firms are increasingly showing interest in outsourcing some of their services to reduce costs. According to Nikhil Rajpal, vice president for global services at Everest Research Institute, “The current financial crisis in the US markets is increasing the interest of stakeholders to understand adoption trends and opportunity areas in offshoring, among other cost-curbing measures. Banks and other financial services firms are under significant cost-reduction pressure. So, a large number of firms plan to reduce headcount in the West and move jobs offshore.”
Aside from financial and insurance services, legal process outsourcing (LPO) will also gain from the US financial crisis and sub-prime meltdown, as the rise in litigation has increased the amount of legal work being offshored to outsourcing destinations like India and the Philippines. As Gary Zeiss, an outsourcing and information technology lawyer based in California, explains “Given the tectonic shifts in the financial market that have occurred in the past two weeks, there is little doubt that an avalanche of litigation will ensue. In fact, it is possible that the quantity of securities litigation will be so great, and the amount of paper that requires analysis so large, that few companies will have any choice but to look to alternative sources to perform critical discovery tasks.”
Mark Ross, Chair of the International Association of Outsourcing Professionals (IAOP) Legal Outsourcing Chapter, supports Atty. Gary Zeiss statement saying that “The financial pressures many corporations and law firms are now experiencing, together with the anticipated litigation flowing from these troubled times will only serve as a springboard to the continued growth of the offshore legal process outsourcing industry.”
The US financial crisis has a largely positive impact on the global outsourcing industry. Banks, financial institutions, and law firms are actively looking to outsource their business processes due to rising costs. Phil Fersht, research director at AMR Research, believes that the merger of banks and financial institutions provide new outsourcing opportunities. Aside from merged financial institutions, Fersht believes that other financial firms, looking to reduce costs, will also opt to outsource their business processes.
Author: Kim G.
Tags: KPO
October 21st, 2008 at 10:23 am
Good to hear that there are numerous opportunities for BPO. collapse of Wall Street has increased the opportunities for BPO. Thanks for the post.
November 1st, 2008 at 3:45 am
The powers-that-be in the US financial sector can be seen as reckless, even incompetent for not arresting the development of the fiasco which is the US sub-prime and financial crisis despite warnings from their brightest economic minds and market insiders. So it’s not surprising that the trust in them is as tightly bunched up as their credit line. The US and its economy needs help and since their domestic institutions appear to have a lot on their plate, they have to turn to outside assistance and services through outsourcing.
March 5th, 2009 at 12:07 pm
A very informative article, you’ve got here.
The closing of Wall Street was a sad event that marked the financial crisis of the West. However, this also led to better opportunities for developing countries, such as the Philippines, to expand their BPO industry. Implementation of this business strategy would benefit the company financially.Companies would surely reduce the cost of production without sacrificing the quality of work.
February 15th, 2011 at 1:03 am
amazing things thanx