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Barclays’ bad omen: IT contractors culled by offshoring

22 July 2008

Paul Clarke

Contractors look set to bear the brunt of banks’ offshoring of IT functions, as Barclays – the latest to jump on the outsourcing bandwagon – says they will be the first to go.

Last week, Barclays announced that 1,800 jobs will be cut in its UK global infrastructure and service delivery unit. And while the bank will make every effort to relocate permanent staff, it revealed that contractors would be shown the door.

This looks set to become a trend, as more banks turn to offshoring IT functions in the relentless drive to save costs.

Rajeena Brar, senior consultant at IT think-tank Pierre Audoin Consultants, says: “While regulatory and compliance initiatives are a must, short-term IT projects that look to introduce innovation to the banking process will be put on hold. This means that contractors will be most negatively affected.”

She adds that most contractors are sticking with banks in spite of an increasing number of rate cuts, because they fear they won’t be able to find work elsewhere.

D-day for 700 Barclays staff is September, while the remaining 1,100 will be axed by 2010.

Citing India, Hungary and Singapore as “centres of excellence”, Barclays reckons it’s necessary to ship these jobs to “key locations around the world” in order to become a truly global – and presumably cost-efficient – bank.

The numbers are much larger than those of rival UK bank Lloyds TSB, which offshored 450 IT jobs last month. And by identifying Singapore as a key centre for technology roles, it joins the likes of Citigroup, Credit Suisse, Deutsche Bank, Lehman Brothers, Merrill Lynch and Standard Chartered, all of which have operations there.

The official line from the UK’s National Outsourcing Association (NOA) is that there’s more offshoring of banking IT jobs on the way, and that competition to be the location of choice is intensifying.

Martyn Hart, chairman of the NOA, says: “Offshoring destinations are springing up all over the world. China is obviously a big contender, but this tends to be for very low level, large scale IT work. Eastern European countries have strong capabilities in high-end IT, particularly application development and engineering. Russia, the Czech Republic and the Ukraine are particularly hot and lots of banks use these regions.”

Comments (7)

  • BarCap are moving some operations from Tokyo to Sinapore, where wages are said to be lower.

    John 22 Jul 2008

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  • that was always on the cards for non business facing IT staff. THere will always be roles for staff with good business facing experience

    Crazdog 22 Jul 2008

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  • "Centres of Excellence" - rubbish as anyone who has called an offshore helpline will know. Appalling communication skills, bureaucratic, time wasters, if it's offshore it will take twice as long and be done badly . Low wages = low quality = more workarounds = increased hidden cost. I have seen code produced offshore for 30% of UK cost but it took the high cost UK experts twice as long to fix the errors. But the bean counters won't acknowledge these "repair" costs or "hidden" costs.

    Wizard of EC1 23 Jul 2008

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  • Sweat shops more appropriate than Centres of excellence. How can one blame the banks for offshoring when labor costs for 1 days work in Singapore may equateonly  to an hourly or two hourly pay rate in London. Small wonder if not all the Back Room Processing /Settlements/Middle Officing hubs end up in Banglalore or Gurgeon. BTW they do speak English fluently and are like educated to a Masters level.

    Prophet of Doom 24 Jul 2008

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  • I got good service from an Indian call centre when my printer broke down. I recently watched a British computer engineer in a central London library attend a faulty pc. When he left the building, about half the pcs that weren't faulty had 'out of order' labels on them.

    Now that's service!

    John 24 Jul 2008

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  • Barclays have just told all IT contractors to take a 10% cut across the board - or leave (4 weeks notice served). No attempt to find out what type of projects they are working on (regulatory, legal, mandatory?) and no understanding of the impact if the projects fail to meet their deadlines. What a shambles and a pathetic lack of management. I've been told they expect to save £3M by this - I've seen this amount saved by a decent audit on a single project. Hope they don;t expect anyone to rush back to them - they do not honour their contracts!!

    Global Retail & Commercial Ballsup 27 Jul 2008

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  • Nothing is wrong with outsourcing, especially if the banks are already global in their operation. In some instance the bank is already providing a complementary service in the region where they are outsourcing. In the long run what matters for the bank is Quality Control on source development and the decission as to how and where they want their central operations to be structured or located. They might even want to decide not to use English as their main language of operation.

    Butty 30 Jul 2008

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