Blogs| Contact Us| Log In| Search Here

Skip Navigation LinksFSOkx Home > Research & Analytics > Analytics > Deal Analytics > Detail


"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 marketing strategy."

"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 roadmap to further enhance our offerings, gain competitive edge and penetrate new markets."

"….because of their far-reaching membership community, for our research the data sample was collected from all geographies, designations, and market segments. This helped us to get a global picture of the whole industry and helped us to formulate an effective global marketing strategy for our services."

Follow us on

Deal Analytics

Bookmark and Share

Outsourcing Deal Analytics: Q1 2013

Executive Summary

The large number of regulations imposed on the financial services industry in 2012 has led to a deluge of uncertainty and a more cautious approach toward outsourcing that continues in the beginning of 2013. Many organizations are delaying making a decision on whether or not to outsource. However, in anticipation of being able to navigate more smoothly in an environment in which risk management and big data have come to the forefront, the financial services industry has not stopped forming strategic alliances.

Based on extensive data gathering and analysis on outsourcing deals, FSOkx presents the key transformation and outsourcing industry trends during the first quarter (Q1) of 2013.

Key Findings

  • 2013 began with less fervor towards outsourcing in the financial services industry. Total outsourcing deal volume declined 21 percent in Q1 2013 from Q4 2012.
  • Credit unions registered a massive increase of 56 percent in outsourcing volume from the previous quarter.
  • Information Technology Outsourcing (ITO) continues its dominance over Business Process Outsourcing (BPO).
  • Cloud computing is penetrating the financial services industry with more industry players seeking cloud platforms and the demand for cloud services continuing to increase.
  • North America again seized the position of top deal origination and deal implementation destination with the majority of outsourcing deal volume occurring in this continent.

Outsourcing Deals in Financial Services Trend Downward

The total number of outsourcing deals in Q1 2013 decreased 21 percent from the previous quarter. FSOkx attributes this decrease to continued delays and ambiguity around the implementation of regulations such as Basel III and various reforms under the Dodd-Frank Act.
Unlike previous quarters in which banking led outsourcing volume, the number of outsourcing deals in capital markets firms edged out the number of banking deals in Q1 2013. The capital markets industry has recently experienced profound changes in derivatives trading regulations, Dodd-Frank, FATCA, and others causing this segment to opt for more robust infrastructures to deal with compliance, trading, and risk management issues. Capital markets looked to outsourcing to fill any gaps in internal capacity.

Deal Signing Outpaces Deal Implementation

During Q1 2013, the number of deal signings (64 percent) outpaced the number of deal implementations. Financial services firms are challenged with the dual mandate of providing optimal service under constrained budgets and are therefore leveraging the expertise of technology vendors by signing more deals.

Massive Increase in Outsourcing by Credit Unions within the Banking Industry

The banking industry continues to invest in mobile banking, digital marketing channels, social media, and payment technologies to increase their profit margins and market share. But the most notable trend this quarter within the banking industry is a huge increase of 56 percent in outsourcing by credit unions.

Faced with liquidity and other operational challenges caused by Basel III, small community banks and credit unions have been forced to rethink their business models. Credit unions have responded by investing heavily in the latest technology platforms and they rely on expertise of vendors. To compete with large commercial banks, credit unions are providing their customers with innovative financial products and services such as mobile banking and personal finance management.

Outsourcing Deals by Broker/Dealers Highest in the Capital Markets Industry

Insistent market and regulatory pressure requires capital market industry players to perform and execute trades at faster speeds with lower costs. To enhance services such as prime brokerage, direct market access, low latency trading, and post trade processing, broker-dealers and investment banks continued to invest in state of the art trading technologies and infrastructure. Further, there was a steep decline of 51 percent in outsourcing by asset management firms during this quarter.

ITO Leads the Way, Dominates BPO Once Again

ITO comprised 82 percent of the total outsourcing deals within the financial services industry, far exceeding BPO. Functioning efficiently in an environment characterized by fierce competition and regulatory compliance, financial firms are using technology as a strategic tool to transform their legacy systems and operational models and enhance operational efficiencies.

Cloud Computing Finds its Way into ITO

The financial services industry is adopting cloud technologies more quickly compared to organizations in the other industries. The use of SaaS (Software as a Solution) for data analytics, straight through processing, and trade support is on the rise compared to last year. Organizations find cloud computing an attractive option as it enables easy deployment and curtails inflated operational costs.
Application support and operations is still the leading type of Information Technology outsourcing at 76 percent. To address a more demanding market place and tech-savvy customers, industry players are opting for solutions such as mobile applications, payment processing, portfolio management, and communications and marketing to gain competitive advantage and achieve high performance.

Middle Office Outsourcing Emerges as the Top BPO Function

Global economic uncertainty and recent trends in the financial services industry have brought regulatory compliance and risk management to the forefront. As Basel III and the Dodd-Frank Act become clearer, firms have started to enhance their risk management and reporting frameworks by collaborating with third-party vendors. As a result, of the total BPO deals, 45 percent are for middle office outsourcing such as risk, portfolio management, trade processes, and performance measurement. Going forward, FSOkx predicts the demand for middle office outsourcing will continue to increase.

North America Maintains its Position as the Leading Outsourcing Destination

The North American continent is the most prolific outsourcing destination: 44 percent of clients and 63 percent of service providers were from North America. The next most prolific destination is Europe with 33 percent of clients and 31 percent of service providers.


Deal Analytics is prepared from FSOkx Deal Tracker which tracks the value and volume of outsourcing deals for the banking, capital markets, and insurance industries within functional domains including information technology, back office outsourcing, call centers, consulting, data management, document and records management, facility management, front office outsourcing, infrastructure outsourcing services, middle office outsourcing, and advisory services.