‘Outsourcing not cause for bank job cuts in Europe’

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New Delhi, Aug 8: Offshoring to low-cost places like India may have been perceived as the key reason for job losses in the western world, but it is mostly internal restructuring that is behind the falling employment rate at European banks, a new report has said.

"Less than 10% of all publicly announced job cuts at European banks since 2002 are due to offshoring. Internal restructuring accounts for the lion's share," according to a latest research report by German banking giant Deutsche Bank.

The recent decline in employment rate of European banks is because of internal restructuring and not due to job-offshoring to various countries including India, it said. Across Europe, there is no correlation between the share of banks that have offshored IT functions and the changes in bank employment between 2002 and 2006, it noted.

However, India still maintains its position as a major offshore destination, largely because of its large pool of affordable, educated and English-speaking workers, Deutsche Bank Research said, adding that "financial services account for more than 40% of Indian IT and BPO exports."

Financial services account for 41% of IT and BPO exports, while telecom account for 19%, manufacturing 15%, retail 8% and media 3%. The banks that use offshoring services at present employ between 32% for IT operations, 38% for support functions, it said. Emphasising on the growing satisfaction and reliance of European banks on offshore vendors the report said "going forward, this share is planned to rise to 40-44%." In a global survey of 50 retail banks, nearly half of all respondents plan to offshore some IT functions during next 5 years, compared to 38% presently.