NatWest Crisis – is offshoring and / or outsourcing to blame?

I was NatWest’s last and final Group Procurement Director, leaving because I didn’t want to go to Scotland after RBS took us over in 2000. To be precise, I didn’t want to compete for the new CPO role because I wouldn’t have moved to Scotland if I’d got it. So they gave me a pile of money and told me to go away. Which was nice...

Anyway, to get paid as an employee you (not unreasonably) had to have a NatWest back account. So a residual effect of that is we have NatWest bank accounts, saving accounts, insurance policies, and my two businesses also bank with NatWest. I’ve always found them good actually – no real complaints. But the last few  days have seen the biggest operational problems , and customer issue, any bank has faced that I can remember, as millions of us have been unable to access accounts, payments or receipts haven’t been recorded, and general chaos has ensued.

And here’s the big question – is this a procurement / supply chain / supplier management issue? Read the knowledgeable IT websites like the Register, and it appears that NatWest have outsourced  or  offshored considerable amounts of IT work to India.

“The tech problems at the RBS banking group that left millions of people unable to access money for four days last week were caused by a failure in a piece of batch scheduling software, sources have told The Register. And at least some of the support staff for that software have been outsourced to India - as recently as February”.

The stories focus on an update to a core IBM system, but I’m not clear whether the operational work is outsourced by RBS to an Indian IT provider or executed by RBS / NatWest themselves through their offshored operations there.

In either case, some are suggesting that these problems may have been caused, or at least exacerbated, because of the lack of skills or historical knowledge of the Indian IT folk now responsible for the maintenance of these key systems. Perhaps, when something went wrong with the upgrade, the problem could have been quickly resolved if experienced staff had been on hand to do that. All speculation of course at the moment.

And it’s too early to tell what the impact of this might be. Will it all be forgotten in weeks, or will it bring down NatWest / RBS? Will it bring in more stringent regulation of the banks in terms of outsourcing, offshoring and use of subcontractors generally? Might it be the tipping point, leading to re-shoring back-office financial services work, which has extensively moved out of the UK over recent years? I suspect this might prove to be quite fundamental, and we will see some interesting debate around these issues over the next weeks and months.

We’ll see, but in the meantime, if Procurement Excellence or Spend Matters haven’t paid you in the last few days, don’t panic, nothing to worry about, all in hand...

Voices (10)

  1. peter:

    Outsourcing to india have several side effects–

    Data Protection Issues:

    Chances for reselling data of the outsourcing company or the employee’s are higher, they may sell the data to call centres or use for their own marketing purpose.

    Most times Money by selling data will be more than they get from from the work ( normally companies are selling on a rate 70 pence to £1.5 per data).

    Security:

    There are chances to lose the structure of your software. This will help hackers to understand the weak points of that software, used third party tools etc.

    There are many hacking companies are working in and around Banglore. For example if you want to get a CD key of any software they will be able to provide the key in a week’s time.

    Stability:

    Not many developers in India will not stay more than six months in a company and chances to make proper documentation is very less.

    Quality :

    Most of the outsourcing companies are splitting the work and subcontracts the works of students.

  2. Dan:

    So…. its not just the public sector that messes up IT outsourcing…..

  3. clark kent:

    Interesting that this is the first article i have seen which refers to the IT supplier as this story has run over the last few days. Seen a few cynics suggesting this has only happened since govt took a stake in the group. Nonsense frankly.

    For me this is an object lesson in the reality of risk transfer. Ultimately this is presented as nat west’s problem and their mistake. Whatever you outsource, risk is never truly transferred out, it is always your problem when something goes wrong.

  4. David Orr:

    To clarify: Not 1st line support for log-ons, password changes and report runs but 2nd/3rd line is in IBM India.

    No serious skills transfer to former Council IT staff to formal & recognised levels.

  5. David Orr:

    Is this like SW1 – where SAP servers & application software are based in the UK, but Tech Support for software changes to SAP is done from IBM India?

  6. Peter Smith:

    More from the excellent Register – still suggesting offshore human error
    http://www.theregister.co.uk/2012/06/26/rbs_natwest_ca_technologies_outsourcing/

  7. Final Furlong:

    It’s simple. They outsourced their IT to Scotland.

  8. Richard:

    Suggest that the location of personnel who (allegedly) made mistake is a red herring. More about management – of a procedure that has such operational/business continuity risks.

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