N° 2005-09 Juin 2005 Guillaume Daudin* Jean-Luc Gaffard ...

Georges PujalsOffshoring was initially driven by economic pressure and the need to cut cost. But latelyoffshoring has begun to undergo an important metamorphosis, transitioning from “somethingto consider” to “something that must be done”. In the early days, most companies opted foroutsourcing. It was the fastest and easiest way to get started, and it required the leastinvestment and limiting risk. However, now that offshoring is a standard business practiceand increasingly becoming a fundamental components of the financial services businessmodel, more and more firms are choosing a “captive approach” (retaining ownership anddirect control through a wholly owned offshore subsidiary). There was a huge increase in“captive” offshoring over the last year and it looks to be the model of choice for the future.That is a clear sign offshoring has been accepted as a core element of the global businessmodel for financial services.Section 3. Business models, activities outsourced and motives for theEuropean banks3.1. Business modelsThe Chart 7 reports the scope of business models used in outsourcing. It shows thatnearly two-thirds of the respondent banks apply “captive models” (intra-group, joint ventureor strategic alliance). Purely intra-group solutions and local non financial companies areequally preferred. Moreover, banks often use different types of business modelssimultaneously, depending on the type of the outsourced activities. On average, two businessmodels for outsourcing are used within a bank.In contrast to the results of previous studies, the respondent EU banks do not seem tohave outsourcing projects with providers in emerging market economies (EME) as offshorecentres. In addition, only 25 percent of the respondent banks said they are considering futureoutsourcing to offshore locations. Around 60 percent of the banks surveyed said theydefinitely would not offshore activities.39