Standard Bank has turned to offshoring some operations in India as one of the solutions to a skills shortage, as well as to deliver skills transfer to South Africa.
The group is also embarking on a substantial skills recruitment and development initiative.
Upskilling existing staff will form a major part of the plan, which is likely to draw heavily on the Indian IT skills market, which leads the world in many IT areas including infrastructure management, application maintenance and support, systems integration and testing.
Standard Bank employed over 600 new IT staff across its operations last year and expects to continue recruiting around the same number this year.
“We have several mandates to fulfil including delivering new functionality to our customers, overcoming the skills shortage in South Africa and rapidly improving the competencies of our IT staff," says Standard Bank’s chief information officer, Jorg Fischer.
Fischer says India has been chosen as the bank’s offshoring destination partner for a number of compelling reasons, including:
* An Economic Intelligence Unit study has shown that due mainly to its quality of service and low costs, India is still the international destination of choice for application and management of secondary sources;
* A global outsourcing survey shows that almost 60% of executives in the financial services industry expect to outsource to India over the next three years;
* The services sector accounted for around 50% of India’s $792-billion (R5,5-trillion) Gross Domestic Product in 2005, with IT-enabled services being the biggest single contributor to the overall services sector; and
* India has the world’s second-largest higher education system and hundreds of thousands of people employed in IT services.
While many countries and companies have been outsourcing client support functions (such as call centres), Standard Bank believes in first offshoring IT services and then later exploring the opportunity to migrate business process outsourcing.
“Many of Europe’s leading financial services institutions are using offshore resources to maintain and develop their IT systems. Standard Bank is still looking into the “offshoring” possibilities presented by India but has not as yet selected a particular partner. We will start on a small scale and if all progresses according to expectations we will then look at increasing our utilisation of any outsourcing partners,” he says.
India, which produces around 400 000 engineers a year and has a massive commitment to ongoing further education, is better placed at present to take on highly sophisticated offshoring projects than other developing markets such as China, Brazil, Malaysia and Russia.
Significantly, research has shown that India has more process-related experience than even the world’s largest financial institutions – this enables it to make a concerted drive into higher value-added services that leverage the country’s cutting edge process-oriented experience and resources.
While other offshoring destinations grow and become relatively attractive, research by Accenture points out that the cost and experience advantages of India are often too large to be ignored.
“There is an excellent work ethic in the Indian IT market and a good culture fit with our own organisation so we believe we will derive many benefits from building a relationship with Indian IT firms,” says Fischer, adding that IT staff in India are well versed and certified in most internationally recognised courses.
Other important objectives of Standard Bank’s tie-up with Indian IT professionals involves maintaining legacy systems, a wide ranging of testing services, data warehousing and other non-mission critical applications with low strategic impact.
“By working together with Indian partners we will be able to ensure that the group leverages capabilities that are necessary for us to compete with other world-class banks in a highly competitive environment,” Fischer adds.
“Knowledge, skills transfer and capacity building by our own home built applications will be important by-products of the entire exercise which is an invaluable investment in the future of the bank and in building South Africa’s IT skills base.”
While Standard Bank is committed to improving the competency levels of its IT staff, it is also keen on developing a more effective pipeline for effective transformation in all ranks within its IT division.
Traditionally, companies start with staff augmentation and then move up the value chain to co-sourcing and outsourcing. Standard Bank is already well along the value chain and is confident it will reap significant benefits for itself and its customers as its offshoring activities intensify.