Offshore Outsourcing: Bank Gets Earful for Exporting IT Jobs

It’s the kind of announcement U.S.-based companies have made into a kettledrum roll of dread for IT workers during the past couple of years: Jobs are headed to lower-waged workers overseas. The trend has led to protests from worker groups and calls to Congress about limiting foreign worker visas.

So it shouldn’t surprise American CIOs to learn that when it emerged Oct. 17 that the London-based global bank HSBC Holdings planned to move 4,000 data processing and call center jobs to China, India and Malaysia by 2006, the angry reaction from leaders of Britain’s big unions was swift and strong.

“The scale and the pace of what HSBC is proposing is what takes the breath away,” says Rob O’Neill, national secretary for Unifi, the European trade union for 158,000 financial-sector workers. “There has been concern about the loss of U.K. jobs through outsourcing for a while, but on a fairly small scale. HSBC’s decision marks the largest single announcement of job losses due to this sort of outsourcing and has brought the issue into sharper focus.”

Both Unifi and Amicus-AEEU, Britain’s 730,000-member manufacturing union, have warned of a possible strike from workers depending on how HSBC handles the job cuts, particularly in cities such as Birmingham and Swansea, Wales, where the local economy is expected to be hardest hit by the closures. Steve Pantak, Unifi’s Wales regional organizer, says the union is meeting with members of the Welsh Assembly in hopes of getting governmental support for limiting local job losses.

The HSBC case is interesting because it isn’t the only British institution to set up overseas shops for IT jobs, but HSBC’s move is the one that has received the loudest critical attention. The response to similar moves by such companies as British Telecom, British Airways and the supermarket Tesco has thus far been fairly mute, says Chris Gentle, an analyst with Deloitte & Touche. “In the U.S., for example, some states are looking at drafting legislation in an attempt to save local jobs, but in the U.K., that sort of thing hasn’t really happened yet,” he says.

The employment export trend, though, is expected to continue. Gentle estimates that 730,000 European financial services jobs will migrate offshore by the end of 2008. “With cost savings of around 39 percent, there is enormous pressure on companies to move some operations offshore. Financial services companies are way ahead of everyone else and are the pioneers,” Gentle says. “Banks such as Citibank were among the first to turn to outsourcing and have put other financial institutions in the marketplace at a disadvantage.”

In the wake of HSBC’s move, some U.K. banks?the Royal Bank of Scotland and its subsidiary NatWest, and Edinburgh-based HBOS?have pledged or reiterated past promises that jobs will not be moved out of the United Kingdom, despite the potential cost savings.

“We will not move jobs out of the U.K. as long as the fiscal and regulatory climate is supportive of business. Though the cost savings could have been considerable, we also took into account the impact on staff and on the communities in which we operate and decided not to make the move,” says Carolyn McAdam, spokesman for the Royal Bank of Scotland.

HSBC’s plans to close five customer service centers in the United Kingdom by the end of 2005 begin in January. HSBC declined interview requests, but its CEO Bill Dalton said through a statement that the move was “essential to HSBC’s continued success…. This is the best, indeed, the only way, of ensuring job security for our staff worldwide.”

Members of Britain’s parliament thus far are taking a wait-and-see approach to offshore outsourcing. Martin O’Neill, chairman of the House of Commons Trade and Industry Committee, says he was expecting the issue to come up at a November hearing the committee scheduled on the IT industry, but the committee has no plans to address the issue directly.

Nigel Roxburgh, cofounder of the National Outsourcing Association, says parliamentary action is less likely in London than in the United States. “Employment laws are very different here and already protect employees to a larger degree than in the U.S.,” Roxburgh adds. For example, European Union law requires employers such as HSBC to negotiate separation payments and end-of-work dates with workers. Regardless, union leaders say they stand ready to fight.