Barclays Risks ABN AMRO Acquisition To Move More Than 10,000 Positions Offshore

Despite competing offers from competitors — including a bid from a consortium led by Royal Bank of Scotland (RBS) — that may derail Barclays' plans to acquire Dutch banking giant ABN AMRO, Barclays said last month that it would ship 10,800 jobs from the West to low-cost countries as part of a restructuring that would follow the acquisition of ABN AMRO. "The reduction in staff is a necessary part of the envisaged synergies from the combination of the two banks," Barclays officials said in a statement.

Barclays' $91 billion offer to buy ABN AMRO would create annual savings of $4.75 billion by 2010, according to Barclays. Part of those savings would be achieved through lower labor costs. In addition to sending thousands of jobs to countries where workers are paid considerably less than their Western counterparts, Barclays said it would also cut outright 12,800 staff positions if its plan is approved by ABN AMRO shareholders. Meanwhile, a trade union in the Netherlands estimates that if the RBS consortium bid succeeds, an estimated 11,000 jobs could be lost in the Netherlands alone, far more Netherlands-based jobs than if Barclays' bid succeeds.

Barclays noted many of the positions would be filled at ABN AMRO's ACES unit — an Indian subsidiary the Dutch bank established for the procurement of back-office and IT services. The Mumbai-based operation is known for enticing workers with dot.com-style benefits, such as a gym and personal trainers.

ABN AMRO also has considerable experience outsourcing to third parties in India. The bank in 2005 handed a chunk of its IT operations, along with 3,200 tech jobs, to five vendors under more than $2 billion worth of contracts. The vendors include U.S.-based IBM and Accenture as well as Indian outsourcers Tata Consultancy Services, Patni Computer Systems and Infosys Technologies.

Word of the planned merger and resulting shakeup came less than two weeks after U.S.-based banking conglomerate Citigroup said it would offshore as many as 9,500 jobs as part of a plan to cut spending by $10.4 billion over the next three years.

The disclosures by Citigroup and Barclays lend credence to a report issued earlier this year by Deloitte predicting that offshore IT spending by banks will increase from the present 6 percent of the industry's $44 billion total annual IT budget to 30 percent by 2010.

Barclays is offering 3.225 of its shares for each ABN AMRO share. If approved, the deal would be the banking industry's largest merger to date.

—Courtesy Paul McDougall, InformationWeek Paul McDougall is a former editor for InformationWeek. View Full Bio