'Offshoring' to boost financial services - report

The financial services industry is about to be transformed by "offshoring", creating challenges and opportunities for the sector here, according to a new report.

Deloitte Consulting estimates that two million jobs in the financial services sector are likely to move in the coming five years.

It estimates that $365 billion (€298.55 billion) of costs will be relocated to offshore centres, translating into bottom line savings of $138 billion per annum for the world's top 100 financial services companies.

Citigroup has become the world's most profitable company over the past five years, partly through the use of offshoring.

Revenue rose by $35 billion and costs only grew by $12 billion.

It is figures such as these that mean no major financial services company can ignore the offshoring trend, says Mr Chris Gentle, director of research at Deloitte Consulting.

Mr Gentle is the author of a new report, On the Cusp of a Revolution. He says the issue has to be before the board of every major financial institution in the western world, including those in Ireland.

Mr Robert Contri, head of Deloitte's global financial services consultancy, said the change which is about to sweep through the financial services sector represents an opportunity for Ireland but that a clear policy statement has to be set out that attracts foreign investors.

"It's not just going to fall on your lap," he said.

As well as moving operations to distant locations, the industry is also involved in a shift towards near-shoring, the movement of certain operations from high-cost centres such as London and New York, to lower cost centres such as Ireland and Scotland.

Mr Derek Moriarty of Deloitte Consulting in Dublin said Ireland was now an attractive location because of the skills pool that exists, coupled with developments in the educational sector.

He sees certain lower end functions in the sector here moving to lower cost centres such as India and eastern Europe, but functions from higher up the chain being "near-shored" to Ireland from high cost centres. This can be achieved if Ireland "plays on its strengths".