Improved efficiency in Britain and public backlash against offshoring are prompting companies to reconsider where they base back office functions
As the recession forces companies to become leaner and the comparative savings from offshoring diminish, banks and businesses are considering returning work back to the UK.
Speaking at the FT Global Outsourcing and Offshoring Conference yesterday, Ian Cramb, chief operating and technology officer for global consumer group for EMEA at Citigroup (C), said increasing efficiency at home has spurred the company to review which offshored work could be brought back in-house.
"A lot of the things that we sent away we are looking to bring back because we have made ourselves cheaper at home.
"Whereas [offshoring] might have been 50 per cent of the cost [of in-house] five years ago, that number is currently only 15 per cent cheaper because we have made ourselves more efficient at home.
"There is a lot of excess fat that has been trimmed off organisations. They have made themselves more efficient and will continue to make themselves more efficient and things will come back," he said.
Aviva Global Services (AGS) has been offshoring the financial services company's operations since 2003 and its CEO Steve Turpie told the conference it has "a very wide range of services that we perform offshore", including claims processing and policy administration.
However, in 2006 it brought part of its household insurance processing back to the UK and last year also agreed a deal to sell its in-house offshore operations, known as captives, to Indian outsourcer WNS.
"One of the things we have done over the past three years is undertaken reviews of all of the processes that we have outsourced in order to streamline that scenario," Turpie said.
"Is there an opportunity for doing more of that? Absolutely," he added.
AGS is taking a fresh look at its offshoring arrangements – a strategy recommended by Lisa Coles, procurement director for IT services and BPO at BT (BT).
"Do not just assume because you put it there five years ago that this is the right market for it to be," she told the conference.
"There might be another location, or the home market might be the right place for it now."
As well as increasing efficiency at home, other factors could prompt companies to keep work in-house.
According to Citigroup's Cramb, in the short term public attitudes to rising unemployment and a growing protectionist outlook towards domestic jobs in the West would lead to fewer jobs being offshored.
"People do not want to hear that 1,000 jobs are moving out of the country because unemployment is rising rapidly," he said.
Although the trend towards offshoring will continue when the protectionist mood lightens he said, companies may not always favour old stalwarts such as India.
"The offshoring model will move around, there are certain parts of the US that are now cheaper than India from an IT perspective. Companies are not going to be looking at the same countries as before," he noted.