Don't blame offshoring for banking IT redundancies
Offshoring might be touted as the current enemy of the UK's banking technologists, especially as more financial institutions look to cut costs, but it's actually responsible for a very small proportion of job cuts.
Less than 10% of job cuts within European banks are as a result of offshoring, according to a report by Deutsche Bank. However, it did point out that UK and German banks shipped a larger proportion of their functions overseas than other European institutions.
"Across Europe, there is no correlation between the share of banks that have offshored IT functions and the changes in bank employment between 2002 and 2006," says the report.
Instead, it says the majority of job cuts occur as a result of "internal restructuring."
Offshoring does, however, seem to be responsible for some recent redundancies in UK banks, with Barclays last month deciding to axe 1,800 jobs and Lloyds TSB shipping out 450 IT positions.
Martyn Hart, chairman of the National Outsourcing Association, says banks are now a lot more switched on to the economies of scale to be achieved through outsourcing and offshoring: "They often have in-house sourcing teams who structure deals with different providers based around the globe."
Banks which offshore IT functions currently employ an average of 32% of their staff overseas, but the Deutsche Bank report reckons this will rise to 40-44% going forward.
A study by Navigant Consulting says just over a third of financial institutions have taken the offshoring route.
Andrew Stewart, head of financial services, Europe at Navigant Consulting, says: "Five years ago it was either seen as an admission of defeat or a wild and wacky option, now nearly everyone has done something."
Although there's an increased focus on cost-cutting, the Deutsche Bank study says 30% of banks actually report an increase in costs in the first year of an offshoring venture. This shrinks to 2% after five years.
