Recent decisions made in the United Kingdom seem to have profitable repercussions for outsourcing companies in India. The UK government has decided to hand back complete control to banks. Further the slow growth has forced banks to think of cost cutting techniques in order to stay in the business.
The financial meltdown and government support
The infamous financial crunch in 2008 adversely affected numerous banks. The UK government at the time chose to save some of the country’s largest banks by injecting 66 billion pounds into the banking system. The government then ended up with significant shares in the banks rendering them nationalized.
Ahead of the 2015 elections, the government has decided to re-privatize the banks. The financial slowdown of 2008 left nearly every bank pinned down by a number of toxic loans. Even after five solid years the financial growth has not reached expectations. This financial crunch and withdrawal of Government control has led to a rethinking of the expenses involved in running the bank.
The industry insiders and observers are all of the opinion that cost-cutting is the only effective strategy for recovery from the financial meltdown of 2008. West, was quoted as saying, “Strategic cost management is really the battleground for the next ten years in banking. The revenues are going to be tough to earn, margins are going to be challenged from competition. So if you’re very good at managing your cost base, better than your competitors, then you’ll be able to reinvest those savings into better products.” West was an integral part of the bank mergers in England.
Such structural and strategy changes could mean that the banks will look into external IT services overseas. Lloyds, a respected UK financial institution has numerous contracts with Indian firms such as Tata consultancy services Ltd., Wipro Ltd., and Cognizant technological Solutions Corporation. Such IT services contracts are all set to increase in number with the influx of many other banks.
The Indian BPO benefit
Indian IT solution companies are all set to benefit from the strategy change in UK banks. The reputation precedes offshore companies as Peter Schumacher, founding father of Value leadership group that advises companies was quoted saying, “The offshore-based firms should benefit disproportionately since they are deeply embedded in these organizations. They have great expertise in IT systems and domain, and have the capabilities in place to manage efficiently and reliably such large scale transformation programs.”
It is not only the large metropolitan cities in India that are going to benefit from UK banks offshoring business processes. Tier 2 cities are also on the watch list as many companies believe that the big cities are short staffed on technical excellence.
Lloyds, for example, is planning to move some contracts in big data and infrastructure management to the smaller, tier 2 cities. This move, Lloyds said, was because of the shortage of talent in the centers located in big cities like Bangalore in India.
Moving to tier 2 cities is also another cost effective strategy as labor costs reduce steeply with the change in cities. Apart from the cost cutting strategy in implementation, other technological changes such as big data, cloud computing, mobile banking and infrastructure upgrades are all set to boost business to Indian outsourcing firms.