Does RBS’ future lie in outsourcing?

The latest UK economic figures paint a depressing picture: annual manufacturing decline stands at 13.8%, and 3.2 million unemployed are predicted for next year. However, the rate of decline in the services sector is slowing.

At a time of bleak news, it’s no surprise that the spotlight has again found RBS lurking in the shadows. Big trouble, it’s fair to say, is brewing.

RBS – that poster boy for the UK’s economic woes and their subsequent mismanagement – has this afternoon announced 9,000 job losses worldwide, over half of which will be in the UK.

The losses will fall in the bank’s back-office functions, such as IT, call centres, procurement and property management. RBS employs 45,000 people worldwide in back-office roles, so 10% of that roster will be lost from the UK alone.

Union Unite has described the announcement as “truly devastating” and “appalling”. Unite is a major contributor to the Labour Party, and the UK’s Labour government currently owns a 70% stake in the company on behalf of the taxpayer.

With former boss Sir Fred Goodwin’s multimillion-pound pension payoff still hotly contested, this is perhaps a recipe for a Spring of confrontation and recrimination – especially in the wake of attacks on RBS offices during G20 protests last week.

At the heart of this standoff, alas, may lie offshore outsourcing companies and their stake in the behind-the-scenes operations of many large UK enterprises.

RBS has said that it aims to keep compulsory redundancies to a minimum and plans to redeploy staff where possible. That may prove to be code for locating them with BPO partners at home or overseas.

Despite RBS’s public stance against large-scale outsourcing, rumours have been circulating since March, fuelled by disgruntled staff, that huge IT layoffs were on the cards as the bank pursued its relationship with Infosys.

Also consider ABN Amro, bought by an RBS-led consortium in 2007. A huge IT consolidation project has been underway since then, during which RBS brought back its acquisition’s IT infrastructure management and application development in house. Previously, it had been managed by EDS. However, RBS retained the Indian wing of its operations (RBS operates in India under the ABN Ambro brand).

• In other news, another government-owned bank has inked a prominent outsourcing deal.

Bradford & Bingley (B&B) has signed a contract with specialist consultancy Euristix to outsource its credit risk management. Twelve staff will transfer to Euristix, where they will monitor the bank’s mortgage portfolio – from B&B’s government-owned Bingley HQ.

However, the timing of the announcement was unfortunate. On the same day, outspoken Goldman Sachs chairman and CEO Lloyd C. Blankfein slammed banks for causing the recession by outsourcing risk management to third parties.

Posted by on 04/07 at 11:45 AM

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