"FSO's research was extensive and detailed. The data, in-depth interviews and market
analysis was all customized and aligned with our business objectives. The cutting-edge
research provided crystal clear picture of the market and helped us to devise our
"The quality of insights and information of the report developed by FSO team helped us
tremendously to understand the pain points, market gaps that existed within the
GRC technology market. By highlighting successful strategies to gain competitive edge,
the report facilitated simple and easy decision making."
"FSO’s quarterly deal analytics and vendor analytics report provides us a good overview
of the industry trends and competitive landscape for business process outsourcing
at functional levels. It helped us to assess our current offerings and develop a
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"….because of their far-reaching membership community, for our research the data
sample was collected from all geographies, designations, and market segments. This
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Fsokx Magazine Q1 - 2006
Special Focus: Investment Manager Outsourcing
To improve the profitability of middle-office outsourcing, trust banks are altering their strategies in this area. Given the complexities in achieving common and scalable middle-office outsourcing business models, trust banks are altering their outsourcing strategies, emphasizing profitability over revenue growth. Over the past year, we think the middle-office outsourcing industry has reached a transitional phase in which large asset managers are taking a more cautious stance on awarding outsourcing business, and trust banks are rationalizing their resources toward smaller and more manageable deals.
The common refrain these days is that firms offshore IT development to improve quality rather than merely to cut costs. But is it true? Is the quality that can be found overseas truly better than what U.S. and Western European-based firms are able to find in their own backyard, or are they just embracing the old clich that the expert is always the guy from out of town?
FSO Destination Primer
Some call Eastern Europe one of the newest frontiers in outsourcing. But outsourcing to Eastern Europe may not be as new as it seems. An academic research paper titled Ownership, Capital or Outsourcing: What Drives German Investment in Eastern Europe, by professors Dalia Marin, Andzelika Lorentowicz, and Alexander Raubold, all of the University of Munich, suggests that Western Europe began looking eastward shortly after the fall of communism.
Information technology maintenance is not the sexiest of subjects, not even in the world of outsourcing and offshoring. Though it still comprises the bulk of whats outsourced or offshored and is a $70 billion market annually, the subject tends to be overshadowed by news of business process outsourcing, or even middle-office outsourcing, such as financial analytics.
Most of us are well aware of the buzz around China and its emergence as an engine of global commerce. For those of us in the outsourcing industry, China as an outsourcing destination has been discussed in hushed tones for several years. Why hushed tones? Well, everyone seems to be seeking the next hot destination where quality is higher and costs are lower than the next country. Unfortunately, the majority of us are just not sure what to make of China and, in particular, Chinese companies that want to maintain our back-office applications or manage our customers retirement accounts. From a legal perspective, this uncertainty is well-founded, as there are many aspects to Chinese law and culture thatat least in 2006limit the attractiveness of China as an outsourcing destination.
As companies develop more sophistication in how they offshore business processes to highly skilled but low-cost workers in locations such as India, the Philippines, Eastern Europe, China, and elsewhere, a variety of offshoring business models have emerged, each with its own benefits and risks. Early on, companies began outsourcing to established service providers in the U.S. and U.K. who would leverage their own offshore facilities to pass along competitive pricing to their customers. Later, some companies worked to achieve even greater cost savings through outsourcing directly to vendors based in the offshore markets. And, as those models proved their value and gained acceptance, and as companies developed a deeper understanding of the practical advantages and risks of offshoring, companies began to establish their own captive service centers in the offshore markets, staffed by local workers who become direct employees of the company or one of its subsidiaries.
Practice Leaders Forum
The outsourcing and/or offshoring of information technology (IT) functions have become commonplace in the financial services industry. Most financial institutions (FIs) have become increasingly sophisticated at implementing outsourcing strategies and managing service provider relationships.
Its a typical story trotted out every week in the financial press another couple of Top Gun traders, tired of Wall Street bureaucracy, resign to set up their new billion-dollar hedge fund. While these star traders hit the sidewalk to convince investors that they can thrive outside the protective wombs of their previous employers, some of the smart money is being invested in service companies to support the wave of cash that has been flooding into alternative assets.
Outsourcing always involves some measure of risk. But the risk that is most often ignored, and the one with the greatest long-term consequences, is that of focusing exclusively on costs and ignoring a concurrent innovation initiative. While outsourcing will deliver reduced costs, the focus of outsourcing is too often on replicating the status quo. Improving process excellence and promoting innovation are often not prime objectives of the outsourcing process. Smartsourcing, on the other hand, is accompanied by renewed attention to excellence and innovation among the organizations core process initiatives. This sort of partnership not only achieves cost savings, but it also establishes preeminence and differentiation. The combination of these capabilities is central in the shift from outsourcing to smartsourcing and will be the driving force in shaping the most competitive organizations.
Special Focus: Investment Manager Outsourcing
The middle office, and to some extent the front office, have for a few years now been the new frontiers in the outsourcing relationships between trust banks and asset managers. While the back-office services relationship between asset managers and trust banks is historic, the middle office is not uncharted, but it is still largely untapped. On the preceding pages, Merrill Lynchs Brian Bedell predicted some trends for this space. For one, cautious asset managers and bottom-line-focused trust banks may lead to smaller middle-office deals. But he and others acknowledge that the potential for long-term growth remains. To some extent, the path that this relationship will take will depend on trust banks abilities to develop middle-office solutions that are palatable to asset managers while still being profitable.
Special Focus: Research and Analytics
After several years of taking IT maintenance and back-office processes offshore, financial services organizations are sending an increasing amount of analytical work to India. Outsourcing financial analytics work is one of Wall Streets worst kept secrets. Its well-known, for example, that most of the top-tier banks, including JP Morgan Chase, Goldman Sachs, and Bank of America, have all established their own captive centers in India to help their equity research desks in the United States gather and analyze data, create financial models, and research targeted companies.
There are a lot of orphans in the stock market. Specifically, The National Research Exchange (NRE) puts the number of orphans, or companies that lack research coverage, at 35 percent, and estimates the number that lack adequate coverage is in the 65 percent range. The Independent Research Network (IRN) adds to those figures the statistic that approximately 1,200 of NASDAQs 3,200 listed companies have no research coverage.