Bank job losses: Offshoring not to blame

The use of offshoring is not the main contributor to job losses in the banking sector.

According to a report from Deutsche Bank, restructuring is responsible for nearly three-quarters of bank redundancies, with offshoring accounting for around 10 per cent of job losses.

silicon.com Financial Services

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In the report, author Thomas Meyer said: "Offshoring does not explain job cuts. Across Europe, there is no correlation between the share of banks that have offshored IT functions and the changes in bank employment between 2002 and 2006. Other factors - such as the reduction of bank branches in Germany or the catching up in financial development in some eastern European countries - apparently dominate the relation."

However, the influence on the banking job market will increase, with the report citing half of retail banks across the world planning some sort of offshoring of IT functions within the next five years, compared to the current 38 per cent.

Back office and support functions should also experience similar growth in taking up offshoring.

National Outsourcing Association research director Nigel Roxburgh agreed with the report's findings, but also stressed that a distinction needs to be made between outsourcing and offshoring, where the latter can mean a company sets up its own in-house 'captive' overseas operation that belongs to the bank, rather than outsourcing offshore to a completely separate third-party supplier.

He told silicon.com: "Our research has found that far from causing job losses, outsourcing has the effect of improving job prospects and the health of the economy. The standard savings that can be made are in the region up to 40 per cent when the deal is outsourced and offshored. It is the underlying IT changes and process changes that allow businesses to use less people. But, outsourcing creates a service at a cheaper level and so increases the size of the market for that service."