×
Home Companies Industry Politics Money Opinion LoungeMultimedia Science Education Sports TechnologyConsumerSpecialsMint on Sunday
×

US banks shift mid-level jobs for higher savings

US banks shift mid-level jobs for higher savings
Comment E-mail Print Share
First Published: Mon, Apr 05 2010. 10 19 PM IST

Updated: Mon, Apr 05 2010. 10 19 PM IST
Bangalore: Small banks in the US are farming out the work of mid-level executives instead of low-end functions they typically outsourced to India in the past, deepening cost cuts while laying off fewer employees, industry executives and experts said.
Banks in American states such as Texas, Georgia and North Carolina are moving offshore more work that’s typically handled by middle-level executives, Phil Fersht, chief executive of HFS Research Ltd, a US-based information technology (IT) and business process outsourcing (BPO) advisory, said in an email.
India’s export-intensive IT industry earns from the US as much as 60% of its revenue, which has traditionally come from carrying out low-value functions on a large scale.
Mounting job losses in the US have built pressure on American companies to curb outsourcing to developing countries. It has become routine for US President Barack Obama to criticize outsourcing, particularly to India, as the US struggles to strengthen economic recovery.
Small banks are, thus, outsourcing work such as building mortgage products or mapping credit risks to Indian firms, but retaining low-end functions such as processing loan applications, which are mostly served by local US communities.
The cost savings from moving mid-level jobs could be as high as 60%, but involve removing fewer employees, said Naresh D’Mello, chief operating officer of Artha Shastra Applied Economic Consulting Pvt. Ltd, a Bangalore-based BPO consultancy.
Cost savings from lower-rung jobs typically are 30%, but banks could save at least three employees doing low-end work for every mid-level job moved, he said.
“Predominantly, (it is) the smaller banks not used to outsourcing even in the US that are starting to embrace this,” said Peter Redshaw, vice-president (research) for banking and investment services at the UK offices of technology researcher Gartner Inc., in a phone interview. “Jobs like risk management, accounts maintenance and investigation, those that are not exposed to the customer and invisible to the average client, are being done (outsourced).”
Gartner estimates Indian back-office firms have won four deals in the past year from regional and smaller banks for credit analysis, equity research and market analysis.
India’s software and back-office exports are expected to grow 13-15% to $56-57 billion (around Rs2.5 trillion) in the fiscal ended 31 March, doubling the growth it registered in the previous fiscal when customers slashed technology and back-office budgets, according to industry lobby Nasscom.
Aditya Birla Minacs Worldwide Ltd, an Indian mid-sized back-office service provider, said it had won four such deals in the last 12 months, where customers moved higher value work while retaining low-end jobs locally.
“These are small in terms of number of people, but (involve) more high value work that helps in decisions, like underwriting mortgages, analysing customer’s credit worthiness for loans,” said Deepak Patel, chief executive of Aditya Birla Minacs, in a phone interview.
Patel did not name the clients or disclose the value of the deals. “It is only going to grow,” he added.
Fersht of HFS Research said the trend of moving high value work by banks is also due to them laying off higher paid executives during the recession of last year as they cut costs. Beyond cost arbitrage, these firms are looking at value to improve their business.
“One in nine banks will be moving industry-specific banking BPO for the first time this year and 40% of those with existing BPO in play will increase scope,” Fersht said. “We’re hearing surprisingly little noise from the locals about BPO at the moment. This could change if the economy worsens.”
raghu.k@livemint.com
Comment E-mail Print Share
First Published: Mon, Apr 05 2010. 10 19 PM IST