According to the Autumn 2011 Labour Market Outlook research from the CIPD, the number of UK firms planning to offshore jobs to other parts of the world decreased from 10% to just 6% in the past year. If you look at these figures for the private sector alone, this drop in ‘offshoring intentions’ was even more precipitous, down from 16% in autumn 2010 to 9% in autumn 2011.

The reasons behind this change are clear: not only has the cost of offshoring to many of the most popular offshore locations increased in recent years because of rising wages, but many of the costs associated with offshore project management have also gone up. As a result, many banks and other financial services firms are seeing a significant reduction in their offshore margins.

Of course, rising costs are just one factor, and few would argue that onshoring is more attractive than offshoring based on wage inflation alone. However, along with these rising costs, a number of practical challenges associated with offshoring have also become more apparent over the years, including logistical/time zone challenges, language difficulties, cultural differences, data security concerns, and/or incompatible IT systems.

Onshoring offers the perfect solution to many of these problems, which is why many financial services organisations are starting to partner with nearshore and onshore outsourcers as a way of streamlining their operations, tightening their internal controls, and creating a more collaborative development process that makes it easier to bring a wide range of compliant and customer-friendly products to the market very quickly.

This last point – collaboration – is especially important in this regard, since many of today’s financial services firms are now aiming to launch new products in just 30-60 days. Short timescales like these are entirely achievable, but a close partnership with a firm’s outsourcing partner will be essential, since frequent, real-time communication will be a vital ingredient in delivering this level of efficiency.

Also, by working with an UK-based outsourcer in an area like third-party administration, banks can now delegate the responsibility for all of their customer communications with confidence, along with product distribution, complaint handling, marketing and more, since it is much easier for these onshore partners to embed themselves in the heart of the bank's operations. As a result, financial institutions will be able to devote their time and energy towards selling a whole new generation of easy-to-understand, fully compliant products that are in tune with their culture and brand and which will satisfy customers and regulators alike.

Even with all of these benefits, however, no one is suggesting that onshoring is going to completely replace offshoring any time soon; certain activities will continue to benefit from ‘follow-the-sun’ processing and reduced labour costs. However, a strategy that brings an onshore element into the mix can undoubtedly offer enormous benefits, since greater collaboration in the form of face-to-face contact, regular meetings and timely feedback can speed up the time-to-market for new financial products considerably.

And make no mistake: in a market where financial services businesses are fighting it out to secure market share and keep hold of their customers, every second counts.