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The assumption often made is that offshoring is all about saving on cost but it’s not: it’s also about getting access to the right skills. One of the drivers for offshoring is that the supply of talent demanded by major financial capitals isn’t all based in those locales. There is a lot of competition for the right people and a lot of movement in the jobs market.

Many large financial organisations are adopting the model of selective outsourcing or multi-sourcing. Depending on the scale and complexity of a project, they will look at three options – near-shore, offshore or in-house development. Cost and location are often not the deciding factors – it will be determined on the best fit and achieving the best results. This model allows companies to choose specialist expertise, reduces exposure by engaging with more than one supplier and increases competition amongst the outsource operations.

High quality software development, especially in fast-moving areas such as fixed income and equities, can be much more successfully outsourced, and that certainly doesn’t have to mean Europe or further afield. More and more companies are looking to Scotland and outside of the M25, where cost savings can be between 30-50% of that of London developers.

Working with companies in the UK as an outsourcing partner is the perfect model for projects of a complex nature that require a lot of close contact between the client and the outsourcing team and where turn around is rapid. These can be short-term projects or longer contracts.

With many of the niche outsourcing companies, the management and employees tend to come from a background of large banks and technology and software companies. With banking and finance knowledge in place, they already understand the compliance and regulatory requirements.

Although near-shoring in UK will never compete on cost against the likes of China, what it does offer is a dedicated pool of talent with the right banking and IT skills to provide complex solutions and analytics. Banks can get the turnaround they need to keep them ahead of the competition and quickly take advantage of market developments.

Gary Scott, managing director, Scott Logic

Courtesy of Banking Technology www.bankingtech.com/