Back office outsourcing is a strategy adopted across industries. The recession has brought about significant changes in the outsourcing space. These changes include outsourcing services such as customer relationship management, procurement outsourcing to improve customer focus and transparency in business processes, and outsourcing end-to-end processes instead of particular functions in the process.

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In the present scenario where the financial industry is still reeling from the effects of the economic recession, a number of banks are adopting innovative solutions to cut costs while also improving efficiency. It is difficult to deny the economic benefits of back office outsourcing especially since the economic crisis has made cost rationalization a top priority for organizations of all sizes.

The question is no longer whether to outsource back office or not, but whether to outsource it to a captive source or third-party vendor. Equally important is to identify the particular processes that a large, middle, or small sized bank should outsource to have maximum positive impact. Multi-sourcing has also emerged as a major trend, where a primary supplier functions as a contractor and arranges other suppliers, or a group of suppliers collaborate to offer a collection of services.

Key findings from the report

• The total back office outsourcing market in U.S. (including FAO, HRO, CRM, and procurement outsourcing) is expected to grow from $38.1 billion in 2008 to $67.2 billion in 2015, at an estimated CAGR of 7.6% from 20010 to 2015.
• IBM and Accenture dominate the FAO market place followed by HP, Infosys, TCS, and HCL.
• Accenture, Ariba, and ICG Commerce dominate the emerging procurement outsourcing market.
• In 2009, the banking, financial services, and insurance (BFSI) segment held the largest share – 40% – of the overall U.S. back office outsourcing market. Information technology outsourcing (ITO) formed the major constituent accounting for 16% of the total deals finalized in 2009.
• Increased M&A activity in the banking space has led to an increase in outsourcing, especially as outsourcing to a third-party or a captive center facilitates significant cost mitigation and optimum resource allocation.
• Outsourcing jobs from the U.S. has always formed a cause of concern for domestic IT service providers. In the new rural outsourcing model, several U.S. firms are setting up development resource centers in small U.S. towns in order to create employment within the country while also offering services that can compete in terms of price with the offshore costs.
• Banks are trending toward SaaS-enabled applications as they involve low initial investment and do not require extensive supporting IT infrastructure.
• Global service providers are increasingly trending toward multiple-process deals, enabling banks to take advantage of the formers’ economies of scale.
• Vendors have now begun offering on-demand procurement tools, which do not involve software for purchase but are accessible via a secured web link. On-demand offerings thus involve very low cost of ownership, fast start-up/implementation, and generally quick ROI.

Strategy formulation

This section seeks to provide a schematic of the marketplace under study; and to enable the report user to determine their competitiveness and positioning in the market. Through our in-depth understanding of the financial services industry, we size the market, identify the trends and drivers, and develop the right framework for strategy formulation to help users maintain or enhance their market position.

Case studies

• The section discusses the impact on banks’ productivity on account of outsourcing the back office. With the help of case studies, we have reviewed the role of back office outsourcing in improving the efficiency of the banks.

Vendor Selection

This section seeks to profile the companies supporting the market under study. We profile the top vendors and analyze user perspectives to help you make the best decision for your financial institution. Every report includes in-depth reviews of the top vendors.

About MarketsandMarkets

MarketsandMarkets (M&M) is a global market research and consulting company based in the U.S. We publish strategic advisory reports and serve as a business intelligence partner to Fortune 500 companies across the globe. MarketsandMarkets also provides multi-client reports, company profiles, databases, and custom research services.

M&M Banking and Financial Services Practice recognize the challenges that financial institutions face while bringing the right products to market. Our reports and consulting practice provides a unique perspective allowing financial institutions to understand and strategize to achieve their product goals. Through a mix of case studies, primary research, and business modeling we provide a 360° view to identify how our clients can create, capture, and retain the value of their products and outthink the competition.

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