More mortgage firms look to offshore to India

With the gradual decline in mortgage lending volume and profits, a report by Needham, Massachusetts-based TowerGroup found that lenders looking to maintain a long-term competitive position in the marketplace have increased their focus on technology and business process re-engineering, as well as offshoring

The TowerGroup report, IT Services and BPO Offshoring to India: From Leading-Edge Strategy to Mainstream Activity, noted that global outsourcing of information technology (IT) services and business process outsourcing (BPO) has become a mainstream strategy in the United States and United Kingdom.

"Offshoring has moved from being a leading-edge business strategy to being a required mainstream activity for lenders that want to grow or maintain their competitive position over the long term," notes the report. "Every top-tier lender needs to develop an offshore strategy and evaluate the captive, joint venture or business process outsourcing (BPO) operating models."

TowerGroup estimated that as of December 2005,15 of the top 20 U.S. mortgage lenders and five of the top 10 U.K. lenders had captive or BPO offshore operations in India, the Philippines or elsewhere.

India, well-known for its abundant supply of well-trained professionals with degrees in business, computer programming and engineering, has seen a strong and growing army of trained, experienced staff in mortgage processing, customer service and backoffice analytics, notes the report.

"TowerGroup's recent visit to a large number of Indian outsourcing firms revealed that security is not as problematic as previously feared, thanks to the good security practices the firms have in place," the report adds. "The quality of IT services and the level of education and training of BPO staff are high in India as well."

TowerGroup observed that employee turnover remains a concern in Indian BPO operations-particularly in customer-facing call centers-but firms are addressing the problem with increased pay, benefits, training and long-term career-development opportunities.

"Labor shortages are also an issue, but the number of new graduates is high," reported TowerGroup. "Indian firms are gradually becoming more flexible in their hiring practices by expanding part-time work, hiring less formally educated employees and hiring older employees from other industries."