Why is outsourcing of banking services just not right?

Companies from Victoria to Halifax have been outsourcing services to Asia and South Asia for years. Why the sudden furor against RBC, the banking giant? Canadians have passively, and sometimes approvingly accepted promises of lower costs from corporations whether they were large retailers, banks, or telecommunications businesses.

News regarding outsourcing by RBC surfaces, requiring Canada’s largest financial institution to issue the very ‘corporate’ and sterile response, “External suppliers with the right skills allow us to introduce new efficiencies, continually improve our service at reduced cost and reinvest in initiatives that enhance the client experience.” The reaction? Something akin to mutiny instinctively stirred across the Canadian landscape. How could the largest bank, which last year posted profits of $7.5 billion on revenues of $29.8 billion, dare to outsource services? Any services? There is not a company on this continent which in its wildest fantasies would dare forecast such ebulliently hyperbolized rate of profitability. So why does it seem so wrong? Why such response to the loss of 45 jobs? 

Canada long ago transformed away from a manufacturing economy, and toward a knowledge and service based economy with the service sector now representing three quarters of the nation’s GDP. Outsourcing by companies in the services sector has a directly degraded Canada’s economic health and will severely impair the country’s future well-being. This damage will be more severe than the impact from transplanted Canadian ‘manufacturing’ to cheap labour regions of the world. The country’s ‘value added’ manufacturing represents less and less of the economy, currently accounting for Ten per cent (10%) of all jobs now when in 2000 is was 15 per cent (15%). Still, whether outsourcing services or offshoring jobs, the harm has been relentless and severe. 

Outsourcing of any sort harms the long term economic health of the country which succumbs to its allure, and it particularly harms the development and education of its own labour force. When one considers this in the context of a country which has, for two decades, been saddled with an out of control and often fraudulent immigration system, the consequence is devastating to the Canadian taxpayer, and to all those seeking satisfactory employment. This situation is particularly worrisome to the many Canadians saddled with overwhelming monthly interest payments, only two weeks of financial cushion, subdued by fear of being just steps from insolvency. 

Unfortunately there are some functions related to our very personal affairs which should never see foreign shores. Banking is one such commission which we entrust to institutions we believe should maintain principles and ethics in direct symmetry with our own. We in effect trust the Boards of Directors and the senior executives to do the right thing on our behalf with respect to our private property, our security and our privacy. Depositors are justifiably upset and their concerns of potential for security breaches are well-founded. Private information located on servers which are being accessed by employees on the other side of the world opens up the potential for mistakes, and worse, it increases the odds of serious breaches in security. 

The CEO of a bank cannot pretend to be incapable of influence on the contractor’s management, its employees and its methodologies. An outsourcing company is in effect the ‘employee’ of the outsourcer. A CEO also cannot disassociate from those foreign employees as if they are ‘out-of-sight-out-of-mind’, and they should not be dismissed for PR purposes with “we cannot be blamed.” Such disavowal is disingenuous and unprincipled. 

The outsourcing bank’s CEO should not only take full responsibility for any actions taken by any part of its ‘outsourcing service,’ but should also be and should feel responsible for such actions. A competent and diligent CEO would ‘know’ and would be intimately familiar of such service providers, just as he would be expected to be intimately acquainted with any department within his company’s structure. 

The current dustup over the banks outsourcing to iGate (the services provider from Bangalore), revolves around IT functions. A prominent excuse served up with some regularity is that there is a dearth of IT talent in Canada. That refrain, used by proponents of loose immigration laws and lax visa rules, as well as firms cutting costs by outsourcing, is old and without merit. 

Ask the graduates of Waterloo Engineering, or of BCIT in Vancouver, of the past 5 years how difficult it has been for them to find gainful employment in their chosen fields with incomes commensurate with their deliverables. Of course if you believe Canada’s mainstream media, you’d be convinced that high tech jobs existed in abundance and were readily available for the picking. You would believe that companies absolutely have to go to India, China, Russia etc., to find IT talent. What you don’t get much of is the ‘intent’ behind the reduction of ‘labour’ costs of Canadian IT personnel, or the lack of willingness to pay talented graduates their worth and commensurate compensation rewarding their risk of conquering absurdly expensive scholarships. 

Let’s admit we do not wish to pay our graduates what they’re worth, instead of pretending there aren’t enough of them, or that they don’t have the qualifications. 

Ask the baristas in any Starbucks how the job hunt is going with their masters degrees. Ask yourself why unemployment among Canadians of ages between 15 and 24 is at over 15%. Actually, ask the young adults in front of the counter surfing the net at your nearest Starbucks, how the job hunt is going. To those who have found jobs, ask if those are full-time jobs making use of their skills, providing all usual benefits. The underemployed college and university graduates are in fact taking up any ‘unskilled’ jobs which might be available, thereby further shoving the ‘unskilled’ individuals further down into the ‘never-employed’ ranks. 

The RBC and other Canadian companies are not contracting iGate because they cannot find skilled employees. As we know, the iGate employees are being trained BY existing employees who will be punted from their jobs. Does that suggest to you that outsourcing is a result of talent scarcity? Not much. A reality facing CEOs, which rarely if ever levitates through the MSM and into our consciousness is the fact that Canada has for some years felt constricting real economic growth and uncertainty. This particular reality has pushed many business leaders to tighten all expenses (use outsourcing where ever possible), and delay capital expenditures. Results have been positive for the bottom line, but not for healthy income increases of the rank and file. 

These moves to improve that ‘bottom line’ are now agitating the ire of depositors whose responses and actions will be felt across the country, and may have long term repercussions on hiring practices of large companies.

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• EDUCATION – THE DYNAMIC OF SOVEREIGNTY

The CEO of a large American corporation tells his Texan audience he can’t find employees educated enough to fill his ranks so he’s filling the void in India. That sounds very familiar, so … no really big deal. Didn’t you make a call yesterday on warrantee work for that new addition to your widget arsenal? You couldn’t recognize the accent but found out that you were talking to someone in the Philippines. Outsourcing has become commonplace as companies subcontract processes to reduce costs or divert the management of functions requiring competencies it did not hold internally. The current use of the term conjures up the procurement of services from another country, although the rarely used term offshoring provides a more authentic description. Either way, if you’re late on making any payments on that widget you won’t be talking to anyone from the Philippines or India, you’ll be explaining yourself to a individual skilled at making you squirm. Someone much more local.

Alright, so who cares? Everyone should.

North America’s larger corporations have been spreading the wealth. Recently hired employees in Jakarta are making a living, feeding themselves and their families. That’s a good thing. Of course, when you start aggregating manufacturing, design, servicing, telemarketing, market research, and engineering, the train heading out of town has a long tail. The complexities of the repercussions are deep and wide, however, the overwhelming signal the North American community should tune into is the statement this shift is making on education. Whether the corporate heads are rationalizing their decisions, and not really telling us that their plan is to use cheap labor, matters not. The objective is not to reverse the train, but to build new and better ones that remain closer to home. Only educated ingenuity will provide the energy.

The North American reality is that education has taken a back seat to almost every other significant sector requiring nourishment for the maintenance of a stable, free, successfully self sustaining and renewing sovereignty. Statistics in support of higher education abound, yet even the social trend leading State of California made peculiar decisions over the past twenty years to cut back educational funding. From Toronto to Texas, teachers purchase writing tools for their students. From Vancouver to Miami, the college and university doors of entry are shut tight to those who cannot, or will not, incur overwhelming debt to attend. So, no surprises on the current state of affairs. Offshoring we go.

We are each a member of the greater communities we inhabit. Commonalities provide us a belonging that unite us in purpose and in interest. While selfishness is a natural condition, awareness of our participation within the broader context reminds us to take heed. As a community succeeds and endures, so does the individual. Each generation wishes progress and greater success on the next. This can only be achieved if successive generations are more educated. Countries are living organisms whose life processes require amongst other viand, one of the most critical of all, education. Education imparts knowledge and stimulates exploration, leading to discoveries propelling greater achievements. Education can bring more to a country than self renewal, it can ignite a reach beyond the current moral, spiritual, scientific, artistic, cultural, or technological accomplishments and possibilities. Education provides a society with social and economic health, instilling mores and ethical values.

An educated population is a freer population in state of mind and more exigent in it’s social and political expectations. Through the industrial revolution, free public schooling was provided and a century ago high schools were built to meet the requirements of an evolving society.

A half century ago, secondary school education may have satisfactorily enabled a career and social cohesion. Today’s reality demands that all education should be provided to maximum capacity of individuals with conditions stimulating the pursuit with all roadblocks removed. With potentiality of perceptions raised a few degrees the current statistical trends on college and university attendance and graduation will be reversed. Once achieved, the example becomes the standard, flying in the breeze exporting this exhilaration of freedom through communication rather than armed insinuation. Universities and colleges are considerable engines fueling the economy. They should all be straining their capacities and enthusiastically expanding.

A wise American with a propensity for flying kites attached to keys, once wrote, “An investment in knowledge always pays the best interest.” Observing the wisdom, and applying it will quiet the expressions of regret and the excuses for offshoring.

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