Investment banks shipped more technology roles out to far flung locations in 2012 as they looked to cut costs, but experts are predicting a reversal of this trend in 2013.
Poland, Budapest, India and the Philippines have been the locations of choice for banks like UBS, Credit Suisse and Morgan Stanley, which all moved more tech jobs out to these locations and Deutsche Bank hinted that it could do the same. However, while cost cutting is still on the agenda, it’s likely more of these roles could gravitate back to the UK.
“There’s been so much dissatisfaction with the development work carried offshore for the banking sector, that many are considering moving this work back to the UK,” says Martyn Hart, chairman of the National Outsourcing Association. “Where technology gives banks a competitive advantage, they want to keep it closer to home, and therefore nearshoring is likely to accelerate in 2013.”
This still doesn’t mean a sudden inflow of roles to London, however. Scotland, Belfast, Ireland, the Midlands, Bournemouth and Bristol look likely destinations, says Hart. What’s more, while the employees are likely to officially bank staff, it’s likely to be an outsourcing style model, he says. The development centre is given service level agreements, specifications and kept at an arm’s length from the core of the organisation.
“It makes more sense to nearshore tech functions – overheads are less, resources are cheaper and it’s close enough to jump on a plane if something goes wrong,” Rebecca Healey, senior analyst at capital markets consultancy TABB Group told us previously.
Gary Davies, managing director of financial services technology consultancy Certeco, says that they’ve been working with banks – including Barclays – to bring tech functions back from offshore centres into the UK at the same cost, while still maintaining an outsourced model.
“Banks are using onsite consultancies in the UK to try and balance the need to cut costs with a desire to maintain a cutting edge,” he says. “While offshoring IT functions is cost-effective, banks are finding that they’re losing innovation by following this model.”
Davies says that they’re keeping costs down by using a combination of very experience consultants and fresh graduates recruited through Certeco’s academy scheme. New recruits are offered salaries of around £25k, he says, and offered extensive training on working with investment banks.
“The standard of graduate recruits in the UK – who are digital natives that have worked with technology since an early age – has been surprisingly high,” he adds.
Hart argues that it would be very difficult to run a UK-based tech operation at the same cost as an offshore centre, but many banks are looking beyond this anyway.
“It made sense to offshore development work when it was all laborious coding work, but as technology has become more sophisticated a lot of the leg-work has been stripped out,” he says. “Banks want products that both cutting edge and culturally specific to their customers – something that’s difficult to achieve when the product is being developed 8,000 miles away.”