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IT Offshoring: A Lesson From The Past ?

Right now, one of the hottest topics in the capital markets, beyond industry regulation, has been the adoption of public cloud. But doesn't this all sound familiar?

Peter Williams, Chief Technology Officer, CJC

This is an extract from a paper looking at cloud technology in the capital markets, available here.

The clamour for public cloud

Right now, one of the hottest topics in the capital markets, beyond industry regulation, has been the adoption of public cloud. Big names like Amazon, Google and Microsoft offer utopian scalability to meet demand; no wasted resources, because you pay for what you use and easy and inexpensive set-up, because hardware, application and bandwidth capex costs are covered by the provider. 

These services suggest significant cost savings and with their wealth of technology talent, it’s believed that cost benefits will not come at the expense of service quality. Numerous tier one banks have started utilising the public cloud as a means to reduce costs and focus on core business. 

But doesn't this all sound familiar?

 

IT offshoring

In the late eighties/early nineties one of the hottest topics in capital markets, beyond industry de-regulation, was IT offshoring. Big names like IBM, Andersen Consulting and Perot Systems offered utopian scalability to meet needs; no wasted resources, because you pay for what you use and easy and inexpensive set-up, because people, training and management costs are covered by the provider.

These services promised significant cost savings and with their wealth of technology talent, it was believed that these savings would not come at the expense of service quality. Numerous tier one banks utilised offshoring as a means to reduce costs. Everything worked out perfectly - right ?

Not quite.

By 2016 we’d seen that, in many cases, there was failure or suboptimal performance in this strategy. Causes ranged from hidden costs, language barriers and 'call centre hell', to service deterioration due to staff turnover, or a simple lack of understanding of the underlying business and the wider industry by the offshoring firms.

More recently, it has been suggested that the catastrophic technology outage suffered by British Airways was triggered by cost-cutting and outsourcing of around 700 in-house IT jobs offshore. BA's parent company, IAG, has seen a significant drop in share value, while some city analysts are predicting the cost of compensation alone will be in the region of euro100m.

So in the capital markets, has a lesson been learned from the IT offshoring experience that could benefit public cloud adoption?

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