Does the Natwest service collapse indicate the true cost of Offshoring?

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I have just been reading allegations on Guido Fawkes (midway down the comment stream below a picture of Osborne greeting one of the EU's prettier finance moinsiters) that the failed software upgrade which caused the systems problems at Natwest was a direct result of transferring batch mainframe maintenance to India. If that is correct, it will prove to have been one of the most expensive cost cutting programmes ever. It is not just the short term customer suffering and consequent compensation claims but the loss of confidence.

The "know your customer" requirements that get in the way of banking competition in the UK will prevent an immediate flight of business to those who still retain such operations within the UK (who?) but others will fear that other banks are now similarly vulnerable and this was typical of the accidents waiting to happen. As it is we will have a dent in confidence in the UK financial system and a ritual hand-wringing that will probably add another layer of unnecessary regulation.

The real lesson is, however, to do with the consequences of running down the UK IT skills base.  
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This issue is all about short sighted savings without understanding (or caring) about the long term high risks involved!

Which UK banks still have their IT systems operated by UK staff? Is this information available and if so, could someone let me know where I can find it please? I for one would feel a lot happier knowing that the systems handling my finances were under the control of people with collectively years of experience of working on these systems, who know them inside out and who work to our well established procedures for backup and recovery.

I am not usually one for making quick decisions but in this case I intend to vote with my feet. The question is, how can I judge which organisations can properly manage my finances?

Channel 4 News reported tonight:

"An ex-employee of RBS warned 18 months ago that outsourcing the company's computer systems to India would create "enormous risk" at the state-funded bank.

...in a letter to his MP written in December 2010, the former employee warned that outsourcing had a knock-on effect on the ability of the bank to deal with IT problems: "I write with regard to the recent decision at RBS to move over 500 IT jobs from the UK to India… This puts the RBS infrastructure at enormous risk of experiencing problems."

youll be hard pushed to find any high street banks that havent moved their mainframe IT resource to India. The same goes for the big 4 retailers, insurance companies and the utility companies. this has been a disaster waiting to happen as, at a guesstimate, the number of UK mainframe IT resource has shrunk by 70-80% over the past 10 years. Did you know that there are 20,000 IT jobs brought in from abroad into the uk each year, the majority by 3 companies.

What we are talking about here is a company trying to reduce it's costs. Any company that wants to survive in this day and age would be wise to do so. The thing that worries me is that this puts offshoring in a bad light, which is completely unfair.

The problems here exist onshore. If you offshore the development and support that's one thing, but the governance should remain onshore. If a developer, dba or any other technical resource has that degree of system access that they can bring down the whole shebang is it the fault of the resource, or a systemic problem that needs to be addressed top down?

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This page contains a single entry by Philip Virgo published on June 24, 2012 9:25 AM.

Who is making the bigger cuts: Whitehall or its Outsource Suppliers? was the previous entry in this blog.

Has RBS put the Information Society back 5 Years or saved us from worse? is the next entry in this blog.

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