According to 'Offshoring in the Financial Services Industry: Risks and Rewards,' a survey conducted by PricewaterhouseCoopers, the scale of offshoring in the financial services sector is set to nearly double by 2008.

A quarter of the participants in the survey currently offshore 10 per cent to 20 per cent of their headcount. However, in three years, almost half the respondents expect this to be the case with them.

Financial services firms offshoring jobs solely as a cost-saving strategy or not approaching projects with caution will fail to reap the full benefits such as greater operational efficiency and increased shareholder value. 79 per cent of the 156 executives surveyed cited cost-saving as the main reason for offshoring. 74 per cent of financial services firms managed to save costs by offshoring activities in the long run.

However, the benefits were less immediate in the first year of the project. Nearly a third of the survey participants actually experienced no change in costs in the first year after offshoring functions and 15 per cent of the respondents reported no change in cost base even after five years of offshoring. Other benefits of offshoring identified by those surveyed were strategic flexibility and improved quality of service.

According to the survey, nearly half of financial services firms currently offshore transaction-based IT activities, while only 12 per cent of the companies surveyed did not offshore any activities at all.

By 2008, however, a further third of respondents plan to offshore HR activities such as payroll and a further 25 per cent expect to offshore customer contact activities such as scripted sales calls.

It is not just transactional activities which will be sourced offshore in the future. Knowledge-based activities such as financial research and modelling will be offshored by 2008 predicts 22 per cent of the organisations surveyed.

According to the survey, India currently ranked the most popular offshoring destination on the basis of nine attributes such as macroeconomic stability, regulations, and labour costs and skills.