We are hearing in financial services IT that RBS tech head Mike Errington will be a casualty of RBS’s cost cutting plan, known as Project Cook.
Errington is nicknamed “Offshore Errington” due to his propensity to send IT jobs to low cost offshore regions.
When I contacted RBS they said that Mike Errington’s position had not changed. Sources say that Errignton is one of the “old guard” and has managed to survive amid fierce cost cutting and technology problems.
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One source said it seems likely that Errington will be sacrificed as part of Project Cook later this month. This view is no surprise given the views of RBS CEO Ross McEwan, back in December. He said the failure of systems was unacceptable and blamed years of underinvestment in IT for the issues.
“For decades, RBS failed to invest properly in its systems. We need to put our customers’ needs at the centre of all we do. It will take time, but we are investing heavily in building IT systems our customers can rely on,” he said.
So perhaps he will want new leadership.
But what about outsourcing?
Will Offshore Errington be damaged due to offshoring? Since RBS acquired ABN Amro in 2007 there has been the offshoring of UK IT jobs to India. In 2009 an IT contractor, who worked for the RBS as a mainframe technician for a number of years, told Computer Weekly business-critical work had been moved to India to cut costs.
“RBS started moving the work we were doing to its datacentre in Mumbai, known internally as Indian Datacentre. I had to train Indian workers to do my job.”
“This was to cut costs and not about filling a skills shortage. They move the jobs to India because it is cheaper,” he added.
Industry sources believe problems with RBS’s IT are the result of offshoring critical work.
In 2012 problems with IT systems at RBS left customers unable to access their accounts for days.The glitch in the CA7 batch process scheduler ended with 12 million customer accounts being frozen. Customers were denied access to funds for a week or more as RBS, NatWest and the Ulster Bank manually updated all account balances.
Then, in December 2013 – on the busiest shopping day of the year – IT problems stopped customers making online and card payments.
I recently blogged about a conversation I had with one senior IT professional within a major UK bank and although he acknowledged that systems need to be upgraded the actual problems that are occurring are the result of increased IT outsourcing/offshoring.
He said: “Most of the issues I’ve seen have been due to human error, equipment failure or in recent years errors made by outsourced firms who are more distant than they were historically. More work has gone abroad as a result of cost pressure and that has led to a drop in standards across the industry. Outsourcing and offshoring development didn’t hurt production but now that more production support is both offshore and outsourced, the scope for live problems is much higher than a few years ago. All too often human error by a junior person at a 3rd party somewhere half way round the world who did not understand or follow a process properly.”
There was an interesting story about Swiss bank UBS losing £1.4bn due to a rogue trader which could have been avoided had a computer used to detect unauthorised trading been more effective. Reports claim the service used to detect suspicious trading is run from an offshore location in India. A source in India told Computer Weekly that the problem occurred in a USB captive in Hyderabad.
At the time I was talking to a contact of mine and he told me that the problem occurred at a UBS captive centre in Hyderabad.
He told me unlike suppliers, who have processes that must be adhered to, captives are less stringent. He told me that the reason the rogue trading was missed was because data had been deleted as part of a system upgrade. “If there had been a process, like that of any supplier, this would not have happened.”
It is not just RBS that has IT problems. Banking giants are experiencing major outages, magnified by customer complaints on social media.
Most major UK banks have thousands of roles carried out offshore. If RBS for example identifies this as a cause of IT problems it will be interesting to see if it and other banks re-shore jobs to the UK.
The PM would like that after his speech at Davos about getting British companies to bring offshored jobs back to the UK.