Print this article

OPINION OF THE WEEK: Four Reasons Why Offshoring's Future Is Threatened

Chris Lamb

26 February 2024

As readers of this news service will know, the word “offshore” is used in a variety of ways, not always in ways that are accurate or informative. Nevertheless, the idea of doing business, or spending time, in a jurisdiction away from one’s original country, or primary business centre, is an important one. For all the talk of a pushback against globalisation, it remains an important feature of finance and business. But the “offshoring” trend faces challenges. That’s the argument from Chris Lamb, wealth consultant at . We present this item as our “opinion of the week”. 

With views of external contributors, the usual editorial disclaimers apply. We value debate. Jump into the conversation! Email

Offshoring has long been a cornerstone strategy for optimising operational costs, reducing risk, and accessing diverse skill sets. However, due to the unique nature of the wealth industry, the future landscape presents distinct challenges. Historically, firms have turned to offshoring to handle back-office functions and other non customer-facing activities, drive cost efficiencies and ensure alignment to strategic investment decisions. 

Many offshoring models are now maturing and moving away from focusing on pure cost to other benefits such as increased efficiency, flexibility and access to a more diverse range of skills.

Several factors will determine how firms continue to use offshoring to help underpin their future strategic plans. Ongoing economic instability and political uncertainties, inflation, interest rates and continued regulatory pressure make the whole proposition far more complex. 

This means that offshoring isn’t as straightforward as it once was, adding further layers of scrutiny and complexity which ultimately ensures that firms act in good faith, avoid foreseeable harm to customers, and support those customers to pursue their financial objectives. 

Threat or opportunity?
The traditional offshoring model is under threat. But if adopted in the correct way, the once purposeful approach to cost reduction can evolve to meet customer needs more effectively. So, what are the threats to offshoring and can they be used to tap into opportunities?

1. Rising costs and skill set demands

Wealth firms are grappling with the impact of rising costs in previously “cheaper” offshoring destinations. Inflation has soared globally, and firms in these pivotal locations are increasingly under pressure to raise salaries and try to balance the books for wider overheads themselves. 

There is also a growing demand for specialised skill sets in the UK – a report by the Learning and Work Institute (L&W) in 2019 found that the UK skills' shortage will cost the country £120 billion ($151.9 billion) by 2030. Overall, there will be a shortfall of 2.5 million highly skilled workers and an oversupply of 8.1 million people with traditionally intermediate or low skills. 

With the likely integration of front/middle/back-office functions, we expect the demand for multi-skilled staff to soar and increase demand for higher pay, which is already proving challenging. 

Chart: Salary growth in key offshoring territories over the last decade

It begs the question as to whether offshoring is future-proof in its current state.

Whilst costs for skilled individuals are increasing, there are still opportunities, and this means entertaining those “higher risk” roles, or those traditionally only ever done onshore when discussing the movement of roles. 

2. Technology's influence on customer service

The offshore contact centre industry has taken a bashing over the past decade – repeated surveys and reports have shown that the public remains highly critical and sceptical of how they perform and their ability to safeguard customer privacy. 

While firms which can promise customers UK-only based contact centres may benefit by meeting the needs of their clients, the additional costs involved, as well as problems of staff availability and retainment makes it unfeasible for many to give up offshoring entirely from a voice perspective. However, using AI to support translating and automating instructions real-time without the need for hand-offs and delays are just small steps towards building customer confidence again. 

3. Changes to consumer behaviour 

Outsourcing customer enquiries and support functions offshore has allowed firms to handle large volumes of transactions while maintaining cost-effectiveness. 

As customer expectations evolve though, they seek more personalised and insightful interactions. Firms are faced with having to enhance the skill sets of offshore customer service teams to meet these elevated expectations. Intelligent business automation provided by AI-powered SaaS technology, which can automate inefficient and time-consuming processes, can be used here. This strategy also enables a firm to work on more productive, value-added tasks, leading to higher employee and customer satisfaction. 

By using CCaaS (Contact Centre as a Service) firms can adopt technologies which transform inefficient working into a highly productive customer-centric based environment. If remaining offshore is the preferred option, adopting a cloud-based customer centre will also allow firms to provide a more seamless, automated service. 

4. Adapting to regulatory changes

As regulations become more stringent, it adds further complexity to decision-making. 

With Consumer Duty cost savings and will help firms experience new ways of working. 

These will compliment some of the existing successes such as 24/7 operations which allow round-the-clock operations by employing teams across different time zones. They will support the ever-growing demand to remain agile and easily scale by using extremely experienced staff. 

There will be continual battles to overcome, technology implementation costs, navigating regulatory complexity and attempts to change customer perception but none of these challenges are new – this time they will produce better outcomes for the customer, for the firm and shareholders alike.