More Reasons Banks Are Taking Outsourced IT Work Onshore

The outsourcing company CGI (GIB) has created 800 jobs in the U.S. in the past five years, due to a "rebalancing" taking place among its customers — large U.S. corporations, a third of which (200) are banks, including 16 of the top 25 U.S. banks.

In this geographic shifting of work, companies are not tearing up their outsourcing relationships, but they are moving some outsourced IT work back onshore. Where before, a company might have handled 80% of its IT workloads in India, the Philippines and other popular outsourcing destinations, today it might do 70% of its work offshore and handle more tasks on U.S. soil.

"The banking industry pioneered moving offshore," says George Schindler, president, CGI U.S. "But we're starting to see clients look at changing their sourcing strategy."

What type of work is coming back stateside? "Point solutions where banks are looking to be innovative, projects that have to happen quickly," Schindler says. Integrating retail channels, new mobile banking apps, mobile payments and security projects all fall into this category.

"Although any large institution needs global delivery, being thirteen hours away cuts down on nimbleness," says Peter Ihrig, senior vice president of CGI.

In addition to the challenge of managing people from a distance, other sources of dissatisfaction with offshoring work among CGI's clients include high turnover in other countries, a lack of experience and rework. "There are a lot of horror stories about enterprise projects gone poorly," Schindler says.

When work is done locally, on the other hand, requirements' definitions, user sessions and testing can all be done more easily, with employees and customers of the bank close at hand.

There's also an interest among banks in paring down the number of vendors they work with, Ihrig says. "In the last year and a half, I've seen four banks revisit their sourcing strategy, and go from lots of vendor partners to a smaller set of vendors, such as two main players and two minor players," he says.

Work that tends to stay offshore is for applications that are low-touch, low change, Schindler says. This includes legacy systems maintenance and support. "There's an in between," he says. "It's not a one size fits all."