A STUDY OF COST SAVING INCURRED BY BARCLAYS BANK: INTRODUCTION

INTRODUCTION

The world of banking has assumed a new dimension at the dawn of the 21st century with the advent of tech banking, thereby lending the industry a stamp of universality. Barclays Bank PLC is a major British multinational financial services firm. As of 2010, it is the world’s 10th-largest banking and financial services group and the world’s 21st-largest company according to a composite measure by Forbes magazine.

Traditionally, all IT related work at Barclays Bank PLC was carried through its on-shore offices based out of London, Radbroke Hall, and Manchester by using permanent employees and contractors. In the early 2000’s, Barclays Bank was attracted to the low labor rates in India and other emerging nations. According to David Skillen, Chief Operating Officer, Barclays, the original driver for outsourcing was labor arbitrage, delivering as much as 40 percent savings compared to the UK.

Barclays initially outsourced its non-voice back-office services for both its commercial and retail banks to Intelenet in 2003. In addition to reducing labour costs, the ability to serve customers 24/7/365 was another lure while opting for outsourcing. David Skillen says its credit card customers often need help on the weekends and holidays, which were expensive days for the internal call centre. “We don’t have to pay more on holidays” once it outsourced, says the Barclays executive.

With time, Barclays outsourced some technology, finance and accounting, human resources, and back-office functions to other Indian service providers. Slowly, the outsourced organizations started performing more complex functions like underwriting, fraud management, and payments processing.

As per David Skillen, lessons learned from the Outsourcing Centre are as follows:

• Good outsourcing relationships take time. Time builds trust, which breeds a sense of partnership.
• A service provider has a greater chance of providing strategic value to a buyer if it controls a process end to end.
• Both sides have to participate in give-and-take. Buyers don’t always get to have their way.

Taking one step forward, today a major portion of the IT related work at Barclays is done via its outsourced centers located in India(Barclays Tech Center India), Singapore, South Africa, Nigeria, Brazil and Lithuania. Barclays is now outsourcing handsome portion of its work to major IT companies like IBM, Infosys, TCS, Wipro and Accenture. Both on-shoring and outsourcing have their pros and cons and have different benefits and risks associated with them. On the whole, outsourcing is on the rise in Barclays Bank PLC.

In this paper we are going to analyze why Barclays Bank PLC went for outsourcing & compare the cost of getting similar work done out of an outsourced location like Pune and an on-site location like Radbroke Hall, UK. Also, companies need to face risks and criticism while going for outsourcing and same happened with Barclays as well.