Natwest - The Big Mistake

There's been a lot of talk (unsurprisingly) about the recent screw-up at Natwest, RBS and Ulster Bank. There's been a lot of people blaming 'outsourcing' despite RBS denying that the work was outsourced. Here's where the confusion lies though, RBS operates in India so although half the team weren't based in the UK they weren't technically outsourced. The term in these instances is 'off-shoring'.

Of course, it's a game of semantics and it's a little concerning to see RBS willingly playing such a pointless game. To most in the UK, if you are sending the work abroad (especially to India) then you are outsourcing (even if you're really off-shoring).

What's scarier, though, is that the failures at RBS could quite easily happen to any other company. It's easy to blame the bankers (we have a lot to blame them for!) but the practices there aren't that different to what's been happening in other companies around the globe. That it was a bank that fell over is probably just blind luck.

To an accountant, the idea of off-shoring probably sounds quite good. We can pay a techie in the UK £25,000 a year or a techie in India £11,000 a year. Hell, we just saved £14,000 per head so it's a no brainer! Unfortunately, anyone who judges such a decision on that sole point is probably only capable of solving 'no-brainers'.

The simple fact is, if your system is business critical then you need to be damn sure you can keep it running. Mistakes do happen, but the more critical the system the more you need to do to try and prevent them.

On the face of it, Off-shoring isn't that bad an idea. Many of the Indian Techies are very well qualified, the trouble is that it's very hard to judge someone's true ability from thousands of miles away. The guy that set off this latest disaster was probably fantastically well qualified, but was inexperienced.

By keeping essential services close to home, you give yourself far more oversight over what goes on (if only because it's easier to get someone in your office and yell at them!). You also retain the ability to ensure that necessary training has been undertaken, rather than having to rely on the word of a supervisor in another country.

Best of all, those highly experienced staff you have in your office? They'll be the ones dealing with the issues, some of them may even have been administering your systems from the point of installation. That's the skillset you need when dealing with such critical infrastructure, it's also the skillset that will save your company a fortune if anything does go wrong.

Of course, some of these savings will never appear on an accountants books. How do you quantify a saving if that saving arose because you prevented an unexpected disaster? Even if you could, how many would take the number given at face value (because IT always exaggerate(!)).

There's no reason you can't outsource some work, but even then for the kind of system we're dealing with here you probably want to ensure the work goes to a competent UK based company. You've much, much more comeback then. After all, if an Indian company screw up, are you sure that you'll be able to recoup the cost from them? Does it go through the UK courts or the Indian ones? Are you sure you'd even see the money at the end of it?

I don't pretend to have all the answers, but these are just some of the questions that should be being asked before taking a decision to off-shore. Bitter experience shows, however, that the only question being asked is "how much can we save", it's short-sighted, dangerous and shows complete ignorance of just how critical and complex some IT systems are.

We all expect the banks to screw up, lately it seems to be their primary business model, but just stop and think: could my company be next? 

Personally, I'd be very interested to see RBS make all documentation relating to the decision to off-shore public. It'd be nice to see exactly what contingencies they planned (if any) as well as what the final decision was based on. Either way, though, they've screwed up something royal this time.

 
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