Globalization of key business processes in finance and other back-office areas is expected to continue to see strong growth over the next three years, with companies increasing their use of offshore resources by over 50%, according to results of a new study by global strategic advisory firm, The Hackett Group.

The study confirms that companies can generate fairly comparable cost savings with most companies driving cost reductions of 25-50% by outsourcing to BPOs. The research also spotlights some stark differences between BPOs and captives. BPOs are able to ramp up twice as quickly as captives, and are twice as likely to exceed expectations for on-time service delivery levels. As a result of the faster ramp up, BPOs also see much faster benefits realization.

However, BPOs fall far short in their goal of driving innovation, the study found. Captives are significantly more successful, but still show room for improvement. According to Hackett, companies need to change the way they plan for, contract, and implement BPO services initiatives to improve performance in this key area.

Hackett also launched a new service center benchmark designed to help BPOs and captives objectively assess the efficiency and effectiveness of their operations in relation to both their peers and other service delivery models.

According to Hackett's research a typical Global 1000 company (with $23.4 billion in revenue) can generate annual savings of nearly $200 million by taking a lift-and-shift approach to back-office globalization while implementing transformation efforts.

“Companies expect to significantly expand their use of offshoring over the next three years. By 2010, these companies have told us that nearly a third of all their transactional staff in finance will be based in low-cost labor markets. That's over 50% more than we see today,” said Hackett chief research officer Michel Janssen.