Barclays shows cost wins override outsource fears

The news that Barclays is considering outsourcing its application development division illustrates how companies are now prepared...

The news that Barclays is considering outsourcing its application development division illustrates how companies are now prepared to risk farming out even the most vital areas of their IT departments in the push to cut costs.

Up to 1,700 UK jobs could be affected by the possible deal, which would include the use of offshore locations, Computerweekly.com revealed last week.

Barclays is in talks with suppliers about the possibility of outsourcing Build Services, the application development section of the Barclays Group IT department. Analysts have estimated that the deal could be worth hundreds of millions of pounds over the life of the contract.

Although many financial services firms have embraced large IT outsourcing deals, these have tended to be for IT infrastructure, such as desktops and servers, rather than applications. This has partly been because application development has been seen as the "crown jewels" of an IT department, capable of giving the business a competitive advantage.

Now, however, the drive to cut costs appears to be overriding other concerns. "Cost pressures have outweighed fears of handing over the crown jewels," said Anthony Miller, research manager at analyst firm Ovum Holloway.

Barclays said outsourcing Build Services was one option in an ongoing review of IT operations. Other options being considered are retaining the service in-house or running it as a joint venture with a supplier.

Build Services employs about 2,000 people and helps the bank harness the benefits of new technology as well as being responsible for applications.

A Barclay's spokeswoman said a final decision on outsourcing would be taken in the fourth quarter of this year. Meanwhile, it is consulting with unions.

Banking union Unifi believes that 1,750 jobs could be affected by a possible outsourcing deal, and it is consulting its members about their options.

Read more on IT outsourcing

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