By Julian Goldsmith, 18 August 2008 12:18
NEWS
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."
Comments
There are 3 comments. Join the discussion
1. Mark Kobayashi-Hillary
As Nigel mentions, it's important to remember the distinction between offshoring and outsourcing, but the DB research highlights that there are greater forces at work. In the USA, thousands of jobs are destroyed and created each day through to the vibrancy of the economy itself - that constant change is because of automation, globalisation, or improvement, and has far more of an effect than offshoring...
2. Karen Challinor
restructuring i.e. downsizing or getting the coalface workers to do more work with the threat of redundancy
ok I'll accept that is the source of a lot of job losses
but then farming the a portion of the remainder overseas is hardly an innocent bystander in all this, is it
those jobs that were offshored have gone out of the UK economy, the money that pays for them goes out of the UK economy, the UK economy is currently in recession, shouldn't we be trying to bring money into the UK economy
"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"
1 - how many banks do it this way rather than the cheaper alternative of finding an existing software house to do the work
2 - they are still using cheap labour from a country with a lower cost of living index and therefore lower wages
3 - it still damages the UK economy
"outsourcing creates a service at a cheaper level and so increases the size of the market for that service."
really and if no one can afford to buy at your market due to unemployment it doesn't matter how cheap or how big it is does it
"Our research has found that far from causing job losses, outsourcing has the effect of improving job prospects and the health of the economy"
I'd be very surprised if it didn't
3. Grey Top
Total nonsense!
I was involved in the senior management of an international bank that has offshored many jobs. I was left in no doubt that the purpose was to get rid of "expensive" people in Western Europe and the USA.
An Owellian Winston Smith might describe that as "restructuring". That type of usage would make a Blairite Spin Meister very proud.