Is COVID-19 Upending Offshore Outsourcing?

Is COVID Upending the Offshore Outsourcing Industry? Why Many Finance Companies are Looking Closer to Home

By Ryan Carter, Senior Vice President of Outsources Services, Vestmark

Almost eight months into the pandemic, the disjointed international reaction to COVID-19 is causing serious disruption for American financial institutions that rely on offshore companies for call center, customer service, middle/back office and automation support. As a result, many are reassessing both their outsourcing partner relationships and their overall business continuity plans going forward. 

Much of this came to a head in March, when India – home to some of the world’s biggest outsourcing firms – mandated a country-wide shutdown that sent American companies using Indian outsourcing services into a tailspin. Prior to the pandemic, many banks relied on firms in India for middle- and back-office functions, but after dealing with the operational fallout caused by the shutdown, many global banks have found that their current offshoring standard operating procedures (SOPs) fall short in times of crisis.

According to the European Banking Authority report titled The EU Banking Sector: First Insights into the COVID-19 Impacts, the offshore dependencies “exposed these banks to operational risks” and “many such offshore facilities were less prepared to address the COVID-19 operational challenges owing to a lack of opportunities for remote working or reduced availability of staff.”

National shutdowns in the Philippines, another offshore outsourcing hotspot, caused serious problems across other industries as well. In April, Virgin Media was forced to hire 500 new U.K.-based call center employees after COVID-related disruptions to their Filipino call centers created a sharp rise in call waiting times. The company announced the new positions in a press release, saying the expansion was a move “to help keep customers connected during the Coronavirus pandemic,” but did not mention any offshore outsourcing issues directly. 

Although unprecedented for American companies, this crisis has unearthed the dangers of trusting critical internal systems to firms operating outside of the U.S. Outsourcing services are essential to the success of many wealth management businesses. While going overseas may have been the economical option pre-pandemic, after March, many firms partnering with U.S.-based outsourcing services saw themselves doing significantly better than their industry peers using international partners. 

Why? Continuity. Even during the height of the pandemic, outsourcing services were still considered essential across the nation, so U.S.-based outsourcing firms had to find safe ways to continue business as usual. With the health and safety of their employees in mind, most opted to implement business continuity plans that enabled teams across all departments to work remotely, and as a result, U.S.-based offshore companies were better able to remain up and running with fewer interruptions during both state and federal shutdowns. 

Even before this crisis, the ability to keep these services running normally, no matter what, has been paramount to onshore outsourcing services. In fact, one of the key reasons many financial services firms do not offshore any of their services—and keep their technology infrastructure fully located within the U.S.—is to avoid a situation in which they have virtually no control over operations.

As the global economy slowly recovers, I believe more financial firms will turn to onshore outsourcing services. If this crisis has taught us anything, it’s to expect the unexpected, and using American partners is a solid path to providing stable, consistent, reliable outsourcing services in any environment.