An article in Time Magazine of 22 April 2013 describes how manufacturing is making a comeback in the USA. It describes the characteristics of the jobs that are returning and reasons for their return. The reasons are:
The characteristics of the jobs are:
Whilst the Time Magazine article focuses on manufacturing, there are strong parallels in the financial services industry and similar changes are taking place there. Certain relatively complex tasks in IT, finance, accounting, actuarial science and marketing that were outsourced to low cost countries are returning to the US, Europe, Australia and other developed countries. As in the manufacturing industry, technological changes, communication challenges and changing cost differentials are driving the changes.
Technological developments include a huge increase in the number and capability of End User Computing tools. These are programs or applications that users rather than programmers can configure and use in conjunction with data readily sourced from the user's company or the internet. They range from simple apps on iPhones, iPads or other smart phones and tablets to automation and analytical tools used by professionals on their PC's. These tools enable users to automate repetitive tasks and provide analysis without having to program them or require the company's IT department to set up large and expensive projects to develop data warehouses and supporting systems.
The reasons for the shift back from offshore or outsourced solutions for many more complex tasks in the financial services industry are similar to those for the changes taking place in manufacturing:
This does not mean that offshore or outsourced IT, finance or accounting functions will become redundant. As with manufacturing, there are many functions where the cost differentials and nature of the tasks will mean that it still makes sense to perform these tasks in that way. There are limits to the capabilities of technology and humans must still perform many tasks, but these are reducing. It does, however, make sense to utilise some of the new tools to automate processes, provide analytics and facilitate the workflow of processes that are complex to communicate, change periodically or can be configured in days rather than months.
Examples of processes in the financial services industry that may warrant on-shoring again are:
For smaller or mid size organisations that do not have offshore or outsourcing arrangements in place, the new technologies provide companies with a highly cost-effective means to match or better the efficiencies that only big multinationals could previously achieve through the scale or these arrangements.
For example, it is now possible to achieve widespread automation of company-wide reports, build a data warehouse and provide management dashboards in less than 3 months and a third of the cost of building these using traditional tools in offshore IT organisations.