Following a string of disappointing financial results, Abbey National is considering shedding up to 3,000 jobs in the UK. Outsourcing its IT to service providers could be worth £100m a year in cost savings.
Uncertainty over their future will lower IT staff morale, according to Phil Morris, director at outsourcing consultancy Morgan Chambers. "They're going to be pretty shaky," he said. "And I doubt whether much is being done to keep morale at an acceptable level."
Although Abbey National has a joint venture contract with EDS which is credited with saving £4m in the company's latest interim results, it has so far resisted outsourcing IT.
But investors are increasing pressure for change, Morris said. "This is a significant change in strategy. One of the things that has stopped them before is a social awareness integral to their culture. Now staff may feel swept aside to save money."
A spokesman for Abbey National said no decision had been made on when or how IT would be outsourced or the extent of the job cuts, but confirmed that these strategies were being considered. "We don't want to leave any stone unturned," he said.
Morris believes an outsourcing deal could save the bank money on IT. "There is a good possibility of saving with outsourcing, but staff will need to keep in control of the contract," he said.
In 2001 Abbey National launched a joint venture with EDS to handle billing, payments and routine enquiries. About 1,700 staff moved to EDS in the deal worth about £260m over 10 years. Savings were expected to total £90m at its launch.
Since then, poor financial performance, linked with a strong retail banking presence, had made the bank a prime target for takeover speculation. An IT outsourcing deal could make it more attractive for potential buyers, Morris said.
"An outsourcing deal can make [a merger] easier because [the buyer] knows what is there. They have a guarantee about who handles the service."