More indications that investment banking development work will be offshored
Technologists in investment banks have reason to be worried; more firms are looking to offshore roles to cheaper destinations.
Among the revelations in HSBC's strategy day on Wednesday, were its plans save $175m by 2013 by shifting IT development resources to lower cost locations. In itself, this isn't particularly unusual for a bank of HSBC's size, but more worrying is the fact that a lot of this is headcount is coming from the investment bank.
It intends to offshore 40% of its technology staff related to its global banking and markets division. Unfortunately, this is something of a growing trend this year.
"Investment banks are undoubtedly looking to save money by offshoring IT development work," says Martyn Hart, chairman of the National Outsourcing Association. "This doesn't always mean job cuts in higher cost locations - some banks deploy a captive centre, and offer transfers across, while others use third-party providers."
Part of their reluctance to do so previously was that cultural differences in offshore centres in places like India often led to mistakes and costly software rewrites, suggests Hart.
This is changing, though. As well as the plentiful supply of technology talent in Eastern Europe, more banks are looking towards South Africa or New Zealand for offshoring IT. In the case of HSBC, it's more likely it'll turn to Singapore for these roles.
"Banks often justify the move by saying that it's not offshoring, but merely increasing technology headcount in locations where they already have a significant presence," says Hart.
HSBC is also expecting to build less in-house and increase its use of external technology vendors. This chimes with research by Celent earlier this year, which suggested that European securities firms were going to increase their spend on external services to $9.5bn by 2013, compared to $7.8bn last year.
As we've pointed to previously, a number of vendors are bolstering their headcount this year.
