Multinationals have already begun to think more expansively about what tasks can be done offshore, notes Jimit Arora, Partner at Everest Group. American multinationals’ spending on research and development (R&D) in low-cost countries roughly doubled between 2010 and 2020.
In 2023, business leaders will need to carefully align their workforce strategies with evolving business needs and budgets. While no location offers all the required skills at the desired price points, there are a few markets where demand is slowing, and the right talent can be found.
Join this webinar as our experts discuss which markets are hot and which are fizzing out. They will also explore which roles are in high demand across industries and geographies.
Whether you’re a workforce strategy executive, sourcing leader, or delivery head, this webinar will provide valuable insights and actionable advice to help you find and attract the best talent for your organization.
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With customer demand for financial services rising across geographies, looming recessionary fears and competition is leading enterprises to expand beyond North America and enter developing markets such as the UK, Europe, Latin America, Asia Pacific, the Nordics, and the Middle East. Read on to understand the geographical differences, financial services trends driving growth, and the outsourcing opportunities in these regions.
Fueled by high volumes, new technological products, and enhanced customer experience, demand for financial services is rising across developing geographies. Banks, lenders, FinTechs, and other banking and financial services (BFS) enterprises are expanding into new markets following the rising customer demand.
The saturated and competitive North American market and high-cost pressures, against the backdrop of the looming recession, are forcing enterprises to move beyond traditional markets and enter new geographies to increase their customer base. Let’s take a look at where they are headed.
The UK and Europe, along with nascent geographies such as Latin America, Asia, Australia, and New Zealand (ANZ), the Nordics, and the Middle East, are some of the geographies identified for rapid development by enterprises that have unique factors driving end customer demand.
But like the rest of the world, these markets have been impacted by the pandemic and domestic challenges that have reshaped business models and environments. Outsourcing service providers can identify these pain points and leverage capabilities to provide support.
A few major trends impacting the enterprises in these geographies, where third-party providers can offer support:
Enterprises increasingly are leveraging third-party provider support to build scale and ramp up services in these growth areas, but various internal and external factors impact the ease of outsourcing in the respective geographies.
Factors like high volumes, technology, and cost margins act as demand drivers for outsourcing from these geographies, as illustrated below.
Let’s take a closer look at some of the geographies that are uniquely placed based on their outsourcing maturity:
Based on Everest Group’s assessment, the emerging geographies for BFS have been segmented into the following three categories:
Each region has unique outsourcing-related differences that should be met with targeted approaches. Service providers willing to make inroads into these geographies must carefully assess the demands and challenges enterprise face. Talent and skill availability, geopolitical risks, and regulations can be obstacles to outsourcing for enterprises and impact costs.
In our report, Emerging Geographies’ Specialized Banking, Mortgage, and Risk and Compliance Needs, we detail these specific nuances and provide recommendations for service providers to approach and expand coverage in each geography.
Some takeaways from our research include:
Please reach out to Sameer Das, Shrey Jain, and Sahil Chaudhary to gain additional insights into the research and to discuss financial services trends.
With Australia facing a looming recession, outsourcing is emerging as a solution for banks and financial institutions to navigate economic uncertainty, improve efficiency, and find expert talent. Read on to learn more about the impact of an Australian recession on the industry and opportunities for service providers.
While the Australian economy has avoided a recession for the past 27 years, it may not be able to withstand the current environment. Its long history of stability can be attributed to relatively stronger population growth than other developed countries, with Australia recording an average 1.37% growth rate between 1992-2017. Clear-eyed decisions by the Reserve Bank of Australia (RBA) on when to follow the US on rates, plus a large reserve and export of minerals and other natural resources, also contributed to Australia ducking a few recessions.
But comparing the Gross Domestic Product (GDP) per capita for the US and Australia from 1970-2021 shows a similar pattern that could signal an economic slump.
Although the American reaction to financial crises seems exaggerated compared to the Australian market, the direction is very similar, with a strong correlation coefficient of around 99% and a coefficient of determination of around 98%.
Correlation doesn’t imply causation, but we can reasonably infer that they tend to move in similar directions or at least are impacted by similar global trends, showing that Australia isn’t as shielded from the global recession as the world wants it to be, at least at a per capita level.
The Australian recession (at least in per capita terms) is slightly complex. Unlike other countries globally, one key driver isn’t behind the economic downturn. Instead, the following hindrances are impacting its economy to varying degrees:
The RBA has been closely observing this situation and is attempting to counter inflation by increasing interest rates, which will lull the economy into a slower state. Interest rates have risen to 3.1% from an almost negligible rate of 0.1% in December 2020. This will greatly hamper consumption and investment spending. Non-discretionary spending increased by 21% in October 2022 from the previous year.
In addition to this, Australian businesses are being marred by the talent crisis, with almost a third (31%) of businesses finding it difficult to find suitable staff and almost half (46%) of businesses experiencing declining operating profits.
In one word: Yes. Financial services have been significantly impacted by the Australian recession. While the Australian banking sector still is dominated by the big four banks (NAB, CBA, Westpac, and ANZ), their share has been declining over recent years with the emergence of tier 2 banks and nonbank financial companies. Operations have been difficult for banks, with almost 20% facing difficulty in finding suitable staff and the cost of doing business rising exponentially.
Rising interest rates also will contribute to lower mortgage originations and refinancing. With consumers having less personal income combined with higher interest costs, residential property investment and mortgage volumes will suffer. Falling property prices also will impact consumer wealth. Apart from originations, financial institutions’ cash inflow will suffer as delinquency rates rise since most loans in the Australian market are variable rate loans.
Also, most transactions now are made using electronic payment methods rather than cash, and checks rarely are used anymore. With the growing trend of using credit cards and increased offerings for buy now, pay later (BNPL), default rates may rise in the future. BNPL also faces challenges under the National Consumer Credit Protection Act, which bans unsolicited credit limit increases and requires background checks for most consumer lending.
Historically, Australia has been an insourced market due to government regulations, job loss concerns, quality issues, and high-profit margins for banks. However, a local talent shortage, high wage inflation, and shrinking profit margins have reversed this trend.
Outsourcing has recently emerged as a popular workforce solution, with 10% of all firms and 22% of large firms considering outsourcing functions in the next three months. This is due to 59% of firms finding applicants’ qualifications insufficient.
Increasing demand for domain-specific expertise, especially in the area of Financial Crime and Compliance (FCC), has made it difficult for firms to find affordable experts. This has led to increased outsourcing interest, even among smaller enterprises. The growing need for technology and expertise in FCC is exemplified by recent cases, such as Westpac’s anti-money laundering (AML) law breaches and the Commonwealth Bank of Australia’s settlement of a $480 million compliance breach case in 2017.
In response to the need for compliance with growing regulations, digital-oriented solutions are in increased demand, and providers are finding success in helping banks improve operations. For example, one bank improved loan origination efficiency by 30% and freed up employee time by transforming its lending operations with the help of Accenture. The National Australia Bank also brought in Accenture to address its financial crimes compliance shortfall and identify high-risk customers.
An effective outsourcing strategy can help banks navigate the current economic recession and achieve cost efficiency with minimal investment and a quick transition time.
Recognizing that the needs of Australian enterprises differ from those in the US is essential. In this market, digital business process services and digital integration in operations are in growing demand.
However, implementing technology at a surface level will not be effective in Australia, as major banks have previously tried this approach with negative results, making them cautious this time. With stringent regulations, pre-existing products must be modified to meet each financial enterprise’s specific size and sector requirements.
Service providers can utilize their existing global delivery network to gain a foothold in the Australian business process services industry. By offering cutting-edge technology and custom solutions that cater to each client’s unique needs, they can provide more efficient and effective services.
Offshoring can be leveraged for transaction-intensive processes, enhanced with automation and analytics to provide intelligent insights. Modern offerings like business process as a service (BPaaS) can also be utilized, and providers can form partnerships to address gaps in their offerings.
While outsourcing can offer a solution for some functions, critical activities such as payments, mortgage administration, and anti-money laundering (AML), among others, often require complex judgment and technology dependencies and are typically managed by onshore control operations with experience in the Australian market.
To gain additional insights and discuss the impact of the recession on the Australian market and outsourcing’s potential in the Australian banking industry, reach out to [email protected].
Learn about the pricing shifts of outsourcing services caused by the current market in our webinar, Will 2023’s Economic Environment Level Outsourcing Price Increases?
View the event on LinkedIn, which was delivered live on Wednesday, January 25, 2023.
Over the last decade, IT-BP services delivery from Latin America (LATAM) experienced a major boost as the location became a sought-after nearshore destination for companies in the US and Canada 🌎. While time zones and cultural similarities have played a significant role in the increase, companies have also discovered lower costs, increased government support, and rising English proficiency📊.
📢In this LinkedIn Live recording, we do a deep dive into Costa Rica and explore the opportunities and challenges of services delivery in this market.
The speakers discuss:
✅ What is the value proposition of Costa Rica for global services delivery?
✅ What is the nature of the talent pool, and what skills are available?
✅ How much cost arbitrage does Costa Rica offer?
✅ What is the on-the-ground experience of players operating IT-BPO delivery centers in Costa Rica?
While India’s tier 1 cities have dominated global services delivery for more than two decades, the country’s tier 2 and tier 3 cities are gaining traction to become the next hot spots. Read on to learn why these locations are grabbing the attention of investors and enterprises.
India has operated as the largest behemoth for the global services industry since outsourcing’s start, driven by an almost unparalleled talent-cost advantage and conducive business environment. Tier 1 cities, such as Bangalore, Hyderabad, Delhi-NCR, Mumbai, and recently Pune and Chennai, have seen most of the growth and continue to attract firms seeking complex skillsets.
However, the triple whammy of high turnover, shrinking pipelines, and rising inflation kept the talent market in flux for most of 2021-2022. As these cities near saturation, tier 2 and 3 cities are emerging as the new growth hubs.
A spate of infrastructural developments has put these cities on the global map for attracting investment. Widespread adoption of hybrid working, satellite offices, co-working models, and plug and play workspaces increase the potential for hiring from tier 2 and 3 cities.
Enterprise preferences for diversifying workforces and leveraging gig models, and reverse migration from metropolitan cities to hometowns post-pandemic further fuels the growth of tier 2 and 3 cities.
While tier 1 cities occupy more than four-fifths of the global services industry, the collective market share for tier 2 and 3 cities has notably increased from 11% to 18% from 2019 to 2022, as shown below:
Let’s explore the race of cities within each tier:
Ahmedabad and Kochi lead the tier 2 city clusters offering a moderately large talent base (79,000-plus graduates) and medium market maturity for most functions. This area has the most established global services delivery ecosystem but the least cost arbitrage among tier 2 cities. GIFT city in Ahmedabad has particularly gained traction due to dedicated government initiatives to attract investment. Jaipur, Indore, Coimbatore, Chandigarh, and Thiruvananthapuram follow next with a healthy mix of IT and business process services (BPS) delivery leaders such as UST and Wipro scaling up to 2,000-plus full-time equivalent (FTE) employees in these locations. After that are Bhopal, Lucknow, Nagpur, and Vishakhapatnam, which are characterized by smaller pools (limiting the availability of mid-to-senior talent and scaled ramp-up) and a larger share of domestic delivery.
Bhubaneshwar and Vadodara lead the tier 3 cities segment offering a moderately-sized talent base (35,000-plus graduates) and low to medium market maturity for IT-BPS functions. The government is investing in IT and digital initiatives in a bid to attract more major companies to Bhubaneshwar, Odisha’s capital city. An IT and IT-enabled Services (ITeS) park is being built in Vadodara through a collaboration between the Gujarat government and Larsen & Toubro (L&T) aimed at creating some 10,000 jobs by 2027. Other tier 3 cities, such as Mysore, Madurai, Mangalore, Nashik, Raipur, Tiruchirappalli, and Vijayawada, offer a smaller talent pool with a lower scalability potential of approximately 250 FTEs.
Overall, we are bullish on the long-term prospects of India retaining its position as the mecca for global services delivery. We expect tier 1 cities to continue to flourish and tier 2 and 3 cities to drive the next growth wave for the global services industry.
To learn more about the relative attractiveness of different cities in India, please read our latest report, India’s Services Delivery Overview – Tier-1 Hubs Continue to Grow, Tier-2/3 Speeding Up.
To discuss the global services industry, please reach out to Parul Jain ([email protected]) and Aarushi Rishi Raj ([email protected]).
To learn about global services delivery in LATAM, watch our LinkedIn Live session, Locations and Talent Strategy – Let’s Talk: Nearshoring to Costa Rica.
As we look toward 2023, economic uncertainty is prime and center. Rising inflation, interest rate hikes, and GDP contraction – matched with low unemployment rates and high talent demand – have left business leaders unsure of what to expect and how to prepare for 2023.
Join Everest Group’s Key Issues 2023 webinar as our experts provide insights into the outlook of the global IT-BP industry and discuss major concerns, expectations, and key trends expected to amplify in 2023.
All the data is based on input from global leaders across enterprises, Global Business Services (GBS), and service providers.
Our speakers will discuss expectations for 2023, including:
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