Financial institutions around the world are under constant pressure to cut costs while simultaneously increasing revenue. In response, many are shifting business processes to countries like India and China with dramatically lower wage rates. This practice, known as offshoring, is fundamentally changing the way financial institutions do business. For example, by 2010 more than 20 percent of the industry's global cost base will have shifted offshore.

Based on our research, we have found four key factors that should be considered when moving operations offshore:

Big becomes best  Firm size is the leading factor differentiating financial services companies that offshore from those that stay onshore, regardless of differences in geography or financial services segment.

Structural changes  Offshoring is changing the structure of the financial services industry, providing a truly global operating model that is significantly more cost-efficient — and launching a powerful new competitive dynamic that is forcing every financial institution to rethink the way it does business.

Importance of execution  A key lesson learned as offshoring has migrated toward the mainstream is that business units and individual managers tend to see risk from a "siloed" perspective. Without a comprehensive risk management view, the broader implications of an offshoring strategy could fall apart.

Four Cs of offshoring  In order to achieve success in offshoring, companies must effectively manage the "Four Cs," which include cost, complexity, culture and compliance.

This Deloitte Research report, based on a survey of offshoring practices amongst financial institutions globally, examines the current and future state of offshoring — and offers measured recommendations on how to make offshoring successful. Read the full report, in the PDF below.

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