Asia gains in the great Aussie IT outsourcing drive

Many information technology professionals in the banking sector face uncertain futures as thousands of jobs are sent offshore and companies look to cut costs in response to the weak demand for financial products.The Finance Sector Union claims that nearly 6,300 jobs have been relocated offshore by Australian banks and financial companies since 2007, and the technology sector is arguably the hardest hit.ANZ, Westpac, Suncorp and Macquarie are among the banks who outsources jobs overseas this year to cut costs in a slow-growth environment. “Large IT infrastructure teams including the less senior, more-commoditised roles are being sent to India, Singapore and the Philippines which are viewed as low-cost centres,” says Andrew Boyce, country head, Australia, iKas International.In March Westpac offshored 119 technology jobs as part of a wider plan to lower headcount costs and to consolidate its staff following the acquisition of St George in 2008.Several banks have claimed it was more efficient to employ specialist service providers to manage tech infrastructure, freeing up internal IT teams up to concentrate on more strategic tasks that are deemed business critical. In June, for example, ANZ announced plans to outsource 110 Melbourne IT jobs to business services group Capgemini.

Perpetual recently outsourced its technology systems to Japanese firm Fujitsu, with 100 staff set to lose their jobs. Only a small technology team has been kept in-house to focus on governance and vendor management.

Which roles are most at risk?

“Testing roles are all but lost from the Australian market,” says Boyce. Most of the offshoring affects general support roles along with maintenance and infrastructure positions, which have been shifted to low-cost centres like India or the Philippines.

One recruiter, who asked not to be named, says many financial IT professionals feel insecure, especially at Macquarie where jobs are being cut or pushed overseas. He has heard of managers spending half their time training new staff in Manila, and some of them are unsure if they will still have a job when they return to Australia.

Which roles will stay?

“The hard-core developer roles will always be based in Australia,” says Boyce. “Any roles closely connected to the business or the trading arm are likely to be kept in-house, along with anyone working within a project management office function,” he says. “These people often hold a lot of domain knowledge and the Australian market has a unique regulatory structure.”

Jobs for technology specialists working in regulation are also safe, especially if they relate to Basel III or the Dodds-Frank.

Long-term effects

Andy Cross, managing director, Ambition Technology, warns that outsourcing could be detrimental to financial institutions in the long term and says this trend is breaking up the traditional career path of junior technology employees. He predicts there will be a shortage of talent in strategically important software-development, project-management and enterprise-architecture roles within the next few years.

“When you break up the ecosystem by taking out a chunk of the market, you lose your ability to develop resources,” says Cross. “These outsourcing decisions are primarily driven by cost but take a short-term view. It is only going to exacerbate a problem we already have in our industry – we just don’t have enough skilled resources.”

The Australian Prudential Regulatory Authority (APRA) has also warned banks about the risks linked to excessive outsourcing of jobs to firms in Australia and overseas. APRA has said it will carefully scrutinise any outsourcing plans which may undermine the stability of the banking system.


 
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