Some of the largest financial services firms in the country are banding together to develop a set of best practices for moving their real-time IT processes offshore.
These companies, in a sector that’s collectively an aggressive user of low-cost offshore IT services, aim to reduce the risk of shifting live operations, including production application support, to India and other countries.

Offshore development has traditionally focused on application development and maintenance?coding work that doesn’t involve access to live production systems or data. But IT shops will take more of their core operations offshore if management of security, privacy and other risks can be adequately addressed.

Once companies start managing their production applications offshore, foreign-based providers will theoretically have access to live data, said Jim Salters, director of technology initiatives and project development at the New York-based Financial Services Technology Consortium, or FSTC, which is developing the best practices. There is “an increasing scale of risk and reward in the kinds of functions you take offshore,” Salters said.

The reward is potentially lower costs. U.S. companies have been racing to use offshore services, and market research firms such as Gartner Inc. are predicting an acceleration of the rush. By the end of next year, Gartner expects that one out of every 20 IT jobs at user companies will have moved offshore.

“The floodgates have just opened,” said Kumar Mahadeva, CEO of Cognizant Technology Solutions US Corp., a Teaneck, N.J.-based offshore services provider. “At this point, we got into a situation where the industry as a whole is almost constrained by how fast it can grow,” he added.

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