An Expensive Outsourcing?

A number of people with whom I work are customers of the NatWest bank, a part of the Royal Bank of Scotland, which readers will recall was the beneficiary of a £37billion bailout at the time of the 2008 financial crisis, (caused in large part by the losses incurred by American banks lending too much money to African Americans and Immigrants who did not pay them back). 

Customers of NatWest and RBS have had a very difficult few days, and so have those banks!

Last Friday a software upgrade within the RBS systems went wrong, and efforts to correct the error accidentally resulted in the entire day’s transactions, for millions of customers, being erased. This was the biggest computer error ever to occur within the UK banking system, certainly in this century,  and has caused total chaos, especially to customers whose salaries were being paid in that day, or whose rent or mortgage payments were due to be made.  In addition thousands of house purchases and business transactions fell through, and in one instance a man on trial, who had been granted bail had to be kept in prison over the weekend as he was unable to raise the necessary funds as a direct result of the failure. 

The bank has promised to compensate anyone who lost money or suffered extra costs as a result of this error, and it is estimated that the debacle will cost the bank hundreds of millions of pounds, even before factoring in the loss of confidence, bad publicity and a potentially hefty fine by the bank regulator. There has also been a sizable slump in the bank's share price.

The problems started last Friday, and have not yet been resolved, and as the bank struggle to restore order and reputation, a story is beginning to gain purchase within the media, albeit it has not made it past the news censors at the BBC.

The story, which the banking unions have also begun totake up is that the error occurred due to inexperienced technicians in Hyderabad India.  It seems that the RBS recently laid off a large number of UK based technicians and relocated their jobs to India where people could be employed to do the job at a quarter of the salary.

If this is true then that cynical any unpatriotic decision to dump British workers and employ cut price staff in India, has cost the bank very dearly indeed.

I do not yet know if the story is true, the RBS CEO Stephen Hestor somewhat disingenuously insisted yesterday that the crisis was not a result of the outsourcing move, but he would say that wouldn’t he, also, he and the bank's rather freyed PR department have suddenly become considerably less forthright on the issue today!  If it does turn out to be true, the irony would be too delicious for words.

Maybe there is such a thing as karma after all!