RBS UK IT staff morale down as offshoring takes hold

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In the last couple of days I have been contacted by a couple of members of the Royal Bank of Scotland's (RBS) IT team.

One RBS IT worker told us that the internal jobs board at the bank earlier this week that there were 67 jobs in the technology and services division. But only 6 were in the UK while the rest were in India.

RBS has a lot to do to repay the government after the bail out of the bank. But it seems that UK based workers at the bank are suffering as more and more IT roles are outsourced to Indian service providers.

The bank is making UK IT staff unemployed with the axing of 1,000 technology jobs as part of a cull of 3,500 positions across the company announced earlier this month. It is increasing its offshoring.

The Unite union says RBS plans to offshore upwards of 500 technology roles to India.

RBS said the movement of jobs to locations such as India is a result of its global nature. "As we work to rebuild RBS and repay the taxpayer for their support we continue to streamline our business to ensure that we remain competitive. The movement of roles between countries reflects the global nature of our business and the need to locate our people close to the customers they serve. However unlike many of our competitors we remain committed to our long-standing principle of situating customer contact work within the country or region where the customer is located."

But RBS sold its retail and commerce business to HSBC in July. Although it said it still has business there. On that same press release RBS said: "India is also one of four key locations globally for Business Services hubs with centres in Mumbai, Delhi and Chennai employing over 8,000 people. Combined, these operations make India one of the largest employment bases for RBS."

RBS said that a significant proportion of the redundancies, announced earlier this month, across its operations and IT divisions were as a direct result of the EU ruling to sell part of our UK branch network.  It said as a result of having 2 million less customers it will need less back office staff

Back in May a contractor at RBS said the bank was gradually sending more jobs to India.

5 Comments

I fear that many CIOs don’t look much beyond day rates when deciding to offshore work and don’t really understand how offshored IT projects work in reality.

As a senior IT manager at a large UK company, I have tried to better estimate what offshore resource is actually costing us. I obviously won’t be posting the official document I produced but I have included some figures to give you an idea of my findings.

Average onshore consultancy day rate £800
Average offshore consultancy day rate £225
Average freelancer day rate including agency fee £500
Average onshore day rate considering the contractor/consultancy resource mix £670

So from the starting point the offshore rate looks quite attractive.

For handovers and training, an offshore resource will work onshore at least 3 weeks a year at onshore rates plus expenses. This pushes their average rate over the year up to about £300.

The overheads to make the offshore module work, KT, communication, hand-holding, double checking the work done offshore etc, has been estimated to be at least 15% of onshore/offshore time. So £670+£225*0.15 = £134. I believe this to be a conservative estimate and these overheads might actually be higher.

So we are already up to £434, still competitive with onshore consultancy rates but now closer to the contractor rate.

If we consider other inefficiencies such as language difficulties, having to rely on emails and telephone for communication, time zone differences, cultural differences, quality issues, and rework then we are probably not saving any money at all.

@David:
Interesting to see the figures spelled out so clearly, confirming what many of us have long suspected. Of course, you could always cut costs by eliminating the use of consultancies and hire more of us UK-based contractors directly!

It would be interesting to know about the rate of project failures and offshoring. From what I have read and seen first hand, offshored projects are significantly more likely to be complete failures and not deliver anything that works.

Matt, I put these figures together mainly to support my argument for decreasing the size of the offshore team and increasing the number of contractors in my department.

The problem I face is that the initial cost of setting up the offshoring structure has been quite high. Therefore, the managers that I report to who made the decision to offshore are very reluctant to accept that it hasn’t produced the savings they expected.

After all, if it was their idea then who looks bad if it’s seen to fail!

In my opinion, you should only offshore low complexity repetitive work that requires minimal communication and knowledge transfer.

Offshoring anything else is a recipe for disaster, and just like ArgieBee mentions, is more likely to lead to complete project failure.

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This page contains a single entry by Karl Flinders published on September 30, 2010 2:21 PM.

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