Australian banks plan to cut back IT offshoring ops to India

BANGALORE: Top Australian banks Westpac and Commonwealth Bank plan to curb offshoring of back office and IT projects to India in an attempt to address local sentiments over a shrinking economy and rising joblessness . The banks are likely to demand that more projects be delivered onsite.

Westpac, which is Australia’s biggest bank by market value, is evaluating outsourcing vendors for a contract estimated to be anywhere between $200 & 300 million, and is demanding that more work be delivered from Australia instead of shifting jobs to anoffshore delivery centre in India or elsewhere.

“Westpac is in discussions with TCS, EDS, IBM, Infosys and Wipro,” said a person familiar with the bank’s outsourcing decisions. “Westpac chief executive Gail Kelly said few days ago that her bank would stop offshoring of IT jobs until the economic situation improves,” he added.

The bank’s decision against offshoring follows an announcement by Ralph Norris, chief executive of Commonwealth Bank of Australia (CBA), last month that his bank would not send any jobs offshore for three years. CBA did not respond to an email query sent by ET last week.

Poor economic growth and rising joblessness is stirring sentiments against offshoring in developed countries especially the US, the UK and Australia. US president Barack Obama said earlier this month he would favour policies that would create jobs in Buffalo rather than Bangalore, a remark widely interpreted to mean that he is cracking down on offshoring per se.

Australia, which witnessed its worst unemployment rate of around 5.7% in 18 years during March, also saw its gross domestic product decline by 0.5% in the fourth quarter. Apart from outsourcing its IT application development and maintenance activities , Westpac is also seeking to replace its existing core banking system.

“Westpac is being advised by Booze Allen Hamilton and McKinsey on restructuring of operational and IT systems, and outsourcing of activities such as backoffice work, application maintenance and development is a part of the exercise,” an outsourcing expert told ET on conditions of anonymity. Westpac currently has a 10-year outsourcing contract with IBM, due to expire in 2010, but the bank is seeking to revisit its outsourcing strategy after its merger with St George’s Bank last year.

However, not all Aussie banks are seeking to reduce offshoring of IT projects. For instance, both ANZ and NAB have made it clear that they will pursue offshore outsourcing in order to gain operational efficiencies.

In fact, ANZ is the only one among big four Australian bank to have a captive centre in Bangalore with around 3,500 professionals. “ANZ will continue to look at the business case for developing Bangalore on a case by case basis,” said Paul Edwards, a spokesman for ANZ.

The Australian banking industry, with potential customers such as Westpac, NAB, CBA and ANZ will invest almost $4 billion on technology this year, according to the industry experts. NAB also continues to look at offshore outsourcing in order to lower operational costs.

“NAB has not made an announcement about offshoring along the lines of the recent announcements by CBA and Westpac. We continue to look at a range of ways we can deliver further efficiencies to the business,” Felicity Glennie-Holmes, a spokeswoman for NAB told ET last week.