Credit Crunch is Likely to Drive Institutions to Offshoring or Outsourcing, Says Northern Trust’s Davis

The current market climate has meant that institutions are under serious pressure to cut costs and improve operational efficiency and this may mean they decide to go the outsourcing route, said Liam Davis, vice president of global data management at Northern Trust. “We need to do more with less and provide a higher level of service to our clients and offshoring is a way to reduce costs and allow institutions to focus on meeting these needs,” he explained to the FIMA 2008 delegation.

Cost containment and the requirement for operational efficiency are two common themes across the market at the moment, according to Davis. Offshoring allows for greater scalability and this makes a compelling argument, he continued. Northern Trust established an offshore captive in Bangalore in November last year and the team has been growing ever since. “I would recommend that firms fully document their operational processes and provide ongoing support to their offshore teams to ensure success,” he said. “Also, you can’t send a system offshore that is not working properly onshore.”

Cost savings of offshoring can be anywhere between 20-50%, according to Davis, based on two surveys that he has produced for his firm. Remote governance can be tricky, hhe acknowledged, but he suggested that firms retain a team onshore (much like the earlier panel) to oversee operations. Metrics and performance must be measured and both onshore and offshore operations must be running on the same platforms and in the same operating environment.

“Offshoring is a revenue saver in terms of staff, operating costs and scalability. Costs are also more predictable than recent reports would give you to believe,” he added. “It is an efficiency saver and we have been able to accommodate the massive growth that our business has experienced over the last year due to the capacity increase the offshoring has provided. We have also been enabled to do some re-engineering around the support of our reference data and inject more quality into our operations.”