Regulatory Compliance Low on the Agenda for Financial Companies IT Outsourcing

October 31, 2006. London: Adherence to regulatory issues does not come top of the list when UK financial companies outsource IT, according to research out today from Luxoft, a nearshore IT outsourcing provider recently launched to the UK market, in conjunction with the National Outsourcing Association.

This surprising result, in light of the burgeoning weight of compliance that financial companies are struggling under, showed that regulation came behind good communication, domain expertise and adherence to security policies, which was third in terms of important issues in outsourcing financial IT. This last result is again surprising given the recent breaches in offshore financial IT projects – only 49% of respondents deemed security a “very important” issue. Cost came in fourth place, which shows that more and more finance companies are seeing other benefits that outsourcing can bring.

The internet-based study, which questioned 76 outsourcing decision makers within UK based IT and outsourcing professionals working at financial companies, analysed respondents’ opinions on nearshoring and offshoring and attempted to identify trends in outsourcing complex financial IT projects. One other major finding showed that, more finance companies are outsourcing high end IT functions and considering offshore and nearshore as potential delivery models. Application development dominates complex ITO with over 70% of respondents saying they are involved with such projects, with ERP (enterprise resource planning) coming last with 13.3%.

The survey also found that IT and outsourcing professionals working in financial services want to be challenged by their suppliers and are no longer content to deal with “yes-men.” 100 per cent would rather be challenged and made to consider all of the potential risks and issues involved in each project by their supplier.

Other key findings of the research include:

· Whilst the majority of respondents (45.8 per cent) consider sub continental Asia (e.g. India and Sri Lanka) as the region that it is easiest to offshore to, nearshore destinations (Central and Eastern European destinations, such as Poland, Russia and the Czech Republic) came a very close second, garnering 39.6 per cent of the votes.

· Airtight and fluid communication between the financial company and its supplier is a far more important factor to end users than cost savings when considering which supplier to choose. Only 43 per cent of respondents deemed cost savings as “very important” as opposed to the 56 per cent of respondents who viewed good communication as “very important.”

· Comparing nearshore to offshore, respondents thought that cost was marginally more of a factor in offshoring, with 78 per cent considering it “important” or “very important” (76 per cent thought the same of nearshoring).

· Quality people was a more important factor in nearshoring than offshoring, with 98 per cent of respondents considering it as “very important” or “important”.

· Financial companies would rather opt for a nearshore IT vendor with focused technology/domain expertise (a so-called “pureplay” company) than the nearshore operation of a global vendor, with 79.2% selecting the former.

Dmitry Loschinin, CEO of Luxoft, commented that: “Financial companies are becoming increasingly sophisticated in their outsourcing strategies – this is highlighted by the fact that more and more companies are outsourcing complex financial IT. Using nearshore or offshore delivery models signifies that financial companies are realising the scope of experience and skills that these countries can offer – it is no longer just a cost issue.”

Martyn Hart, chairman of the NOA commented: “The survey reflects that financial companies are using nearshore and offshore for transformational purposes – they want to be challenged in their thinking and their IT strategies. The country that offers them this will depend on cultural compatibility and the quality of personnel. Best practice underpins outsourcing of any kind and as long as finance companies adhere to this, they are more likely to achieve success.”

About Luxoft

Luxoft, founded in 2000, is a global software developer and IT services exporter with operations in the US, UK, Ukraine and Russia. Luxoft has the world’s largest delivery capabilities in Russia and CIS.

Luxoft provides a full range of custom software development services and enjoys long-term relationships with clients including some of the best-known global business leaders, such as Boeing, Deutsche Bank, IBM and Dell. Luxoft also works closely with many mid-size growth companies and independent software vendors (ISVs).

Luxoft’s software development processes meet the highest quality standards, and the company was the first in Europe to achieve Level 5 CMMI quality certification. Luxoft runs research and offshore development centres in Moscow, St. Petersburg, Dubna, Omsk plus centres in Kiev and Odessa, Ukraine.

Luxoft has recently won the National Outsourcing Association’s “Financial Outsourcing Project of the Year 2006” for its work with Deutsche Bank. The company has recently been recognised by BusinessWeek as the top emerging outsourcing provider in Russia and Eastern Europe, was ranked as the top IT services company on the Rising Star list in the IAOP’s Global Outsourcing 100 and was featured in Global Services Magazine’s Global Services 100 which recognises the world’s most innovative business and technology service providers. For more information visit www.luxoft.com.

About the National Outsourcing Association (NOA)

The NOA is an independent body whose objective is to ensure effective business management through the promotion of best practice, service and innovation in the application and development of outsourcing. The NOA’s role is to lobby UK government, OFCOM and the European Union on matters affecting the collective interests of its members and to deliver information on market developments and lessons learned from business outsourcing.

Members fall into three main categories:

· Users - UK and overseas companies, which have outsourced (or are about to outsource) significant business infrastructure, such as: IT; telecoms; and processes
· Suppliers – companies which fulfil outsourcing contracts
· Support services - legal, recruitment and consultancy service companies which support the industry

The NOA communicates the significant benefits and strategic lessons of outsourcing to a wider audience, through conferences, seminars and publications. For more information on the NOA please go to: www.noa.co.uk

Press Contacts

Lucy King/Cheryl Wanless/Rafi Cooper
Buffalo Communications
Tel: +44 (0) 20 7 292 8687
Email: Luxoft@buffalo.co.uk