European and US bank executives are no longer automatically finding the best bargains in far-flung locales like India when they search for locations to outsource their complex back-office functions. Instead, says Owen Hall, managing director of GFT UK in London, companies are finding more dependable and cost-effective arrangements with firms closer to home in Europe.
The sheer complexity of today’s banking applications coupled with the increased pressure brought about by the Sarbanes- Oxley Act of 2002—the US legislation that requires greater transparency and accountability among publicly traded companies—is prompting these executives to take their outsourcing activities to countries with more sophisticated information technology industries.
Hall says countries such as Spain and Italy are seeing some of the largest growth in outsourcing activity. And the newer members of the European Union, including Hungary, the Czech Republic, Poland, Latvia and Estonia, are also in a good position to attract Western financial institutions with their combination of lower costs and a compatible cultural background.
“By outsourcing to Europe, businesses can gain a competitive advantage without having to struggle with the cultural and management issues of offshoring,” says Hall.
GFT UK, which has seen its sales nearly triple from 2002 to 2003, is the British arm of GFT Technologies, an information technology firm based in St. Georgan, Germany.
Hall says the greater accountability brought about by Sarbanes-Oxley means business leaders need to know exactly what’s going on in all aspects of their business operations. A function outsourced to a country such as India may no longer be close enough for comfort.
“Workers may not have experience of banking applications and the levels of realistic results possible, so they may not be able to recognize what they are looking at, whether the calculation is wrong, or even how to get the right data in the first place,” Hall says.
—Paula L. Green