Is the NatWest fiasco the fault of outsourcing to India?

Well, we can answer that immediately – of course it isn’t!

Obviously there are going to be useless IT people in India, and the incentive of lower wage bills will have introduced some of them into the IT infrastructures that we use in the UK.  However, it is equally obvious that there will be useless IT people already working here, and at several times the salary!

To blame, as some newspapers have done today, the Indian outsourcing trend for the disastrous week that NatWest/ RBS have experienced is short-sighted to say the least.

It’s obvious that the working environment is changing rapidly.  Some of this is the result of technology, like cloud computing, but the drive to change is as much social and economic as it is technological.  Gone are the days when you leave school and get a job and work your way through the firm to a management role and a healthy pension.  The working life of many of us in the future will be that of working for multiple employers in a variety of roles, and on a range of projects.  We will, in other words, all be outsourced and outsourcing.

Who needs the cost base of expensive office premises and staff on the permanent payroll, when you can turn the tap on and off as and when required?  It doesn’t make business sense to do anything else in many cases.

Clearly, this model cannot be universal – someone needs to build cars and make televisions and dig coal (while they can!) so clearly permanent jobs and fixed locations won’t vanish altogether but, for many, outsourcing will be the norm as opposed to simply an option.

In terms of traditional IT, phrases like Total Cost of Ownership (TCO) and Return on Investment (ROI) are an integral part of procurement policies and decisions.  The Indian market is currently low on TCO and, consequently, high on ROI so is clearly going to attract interest from organisations with massive IT infrastructures and costs.

Obviously,  it’s easy enough to provide a cheap service if it’s also rubbish – so what’s the reality of outsourcing IT to India?  As a business process person, I’m aware of something called the Capability Maturity Model (CMM), which is a method of measuring the effectiveness of processes.  It was established by the US Military initially, in order to define the processes involved in software development projects, and has gone through a range of iterations since then.  Essentially it becomes a benchmark of how ‘mature’ a company is based upon a comparison with similar businesses undertaking similar projects for a similar customer base, on a scale of 1 to 5 (5 being the most mature).

Of the world’s CMM level 5 companies, between 50% and 65% (depending on which sources you believe) are in India, so the competence of these businesses is no more in question than any other software provider in any other country.  The Indians themselves are evolving their businesses to fit this new globalised environment, into which they have bought wholeheartedly as a culture.  Many companies are now marketing on quality as opposed to cost, and the initial barriers of communication and cultural differences are becoming less of an issue.

It’s not for everyone, of course, and it doesn’t always work – it is a myth that it is always going to be cheaper to outsource to India, or that the process will be straightforward.  Equally, there is no guarantee that the result will be better than, or even as good as, the UK-based operation that it has replaced.  However, all of that could equally be true of the web developer just around the corner, or the IT support company in the next street from your office.

Like any other business decision, carry out your due diligence, and do your best to find the right partner, as opposed to responding to the first email that hits your junk folder from Bangalore.

The Guardian reader in me can’t help thinking that the reasons for the knee-jerk reaction to the apparent involvement of outsourced Indian services in the NatWest saga are not entirely business-related!

Leave a reply

Your e-mail address will not be published. Required fields are marked *