HSBC to slash jobs and overhaul IT

HSBC is to shed 50,000 jobs globally in a major restructuring that is intended to save the bank $5 billion per annum by 2017.

  10 6 comments

HSBC to slash jobs and overhaul IT

Editorial

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The drastic action will see the bank sell its businesses in Turkey and Brazil, shutter bank branches and shift more tech development to offshore regions.

Up to twelve percent of the bank's branches globally will be closed as it emphasises a shift to more online and self-service channels. The bank has allocated a $1 billion spend in digital technologies over the next two years to reduce frontline and service roles, while reducing its branch square footage by 20% in seven key markets.

In the UK, where up to 8000 jobs will face the axe, the bank is planning a rebrand of its high street presence but is yet to decide on a new name. Options could include reviving the Midland Bank brand, or adopting the name of its UK online bank, First Direct. The bank has yet to decide whether it will offload the retail bank in the wake of new ring-fencing rules separating consumer banking from the wholesale markets.

A large part of the planned savings will stem for an overhaul of IT, moving more applications to the cloud and shifting development to lower cost economies. China and India will get the lion's share of development work, moving from a 50% share to 75%, with an estimated saving of $525 million.

The bank expects to reap a total of over $1 billion in savings with the move to offshore locations and by eliminating 750 of its existing 6,700 applications, introducing agile methodolgies, buying in more packaged applications and consolidating hardware via a shift to the cloud. A further $0.5 billion will be found from supplier consolidation.

In laying out his plans to reshape the business HSBC chief Stuart Gulliver says: "We recognise that the world has changed and we need to change with it."

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Comments: (6)

A Finextra member 

It is sad to see that the perception there is "as if the only way to adapt the change is a massive lay offs and slash jobs". I wish the change was observed much long ago and adaptation could have been done much smoothly. Sorry for all the ones who lost their jobs :(

Brett King

Brett King CEO & Founder at Moven

I've stated in private discussions my belief that HSBC will be the first major retail bank casualty of the smartphone/digital revolution. I said this because HSBC's entire structure for their retail bank over the last 30 years has been about acquiring branch networks in new markets for continued growth. Now that branches are failing, HSBC doesn't appear to have the DNA at the top to change their approach to revenue and relationship. They've left their run too late in my opinion.

I'm not sure how they'd become truly digital at this rate.

In an interview with a recruitment team looking to hire a new HSBC global "Head of Digital" back in 2012 in London I asked them only two questions. What was the job title and what was the budget? The job title "Global Head of E-Channels" told me all I really needed to know, that they still didn't get that this wasn't "E" this was the future of the bank - that this was strategic, that this wasn't a channel, it was a culture.

Secondly, the budget they discussed was roughly 1/50th of what Comm Bank was spending on digital that same year. 2012 was the year to make these tough decisions and restructure, and they missed their opportunity.

There are some fantastic people at HSBC that could transform the bank if only they had the latitude, but for too long they've been beating their heads against that corporate brick wall of the branch-first mantra. I hope that this overhaul gives them the chance to shine, but I have my doubts...

The reality is that this is just one more indicator of the irrelevance of traditional banking models when it comes to revenue and engagement. If you still need a signature on a piece of paper in a branch to sell a retail banking product, you are already screwed. Pack up, and go home - there is no future on that basis.  

Igor Ageyev

Igor Ageyev Enterprise Architect at GMIA

From my point of view the main question is what is the driver of that change in HSBC and what goals that change will help to achieve for the entire bank.

Not questioning importance of digital and IT technologies in banking sector I don’t see them as a silver bullet or panacea for all problems. Banks are not failing so far because of IT technology; at least I don’t know such examples.

I also don’t know any research which demonstrates branch disadvantage and digital advantage or vice versa for retail bank business at enterprise level. If HSBC would be able to cut down their operational expenses in long term and improve profit with that technology change that would be an interesting result to look at.

Implementation of a new technology of that scale is complex and time and resource consuming process and benefits from it are not that straight forward. That is even more important in the current situation when profitability and growth is not that generous.

Technology is a capability provider and could make for example customers life easier in some cases but would not make them spend more or provide them more power to spend.

Such big change like migration of bank IT to cloud or conversion of branch channel to digital channel must be carefully planned and understood. That is not a question of budget or time or who does it first but more question of who does it right.

I hope HSBC have answers for those questions and planned that change at enterprise level not just as a new big IT project.

Nealle Page

Nealle Page Payments Product Manager and Subject Matter Expert at Looking for new opportunities

I have to agree with @Brett King, I am an HSBC customer and have been for 7 years now. I have also been involved in digital banking initiatives for some time now too and I honestly hate the HSBC mobile experience.  It reminds me of a corportate web service from 10 years ago when the design and experience mattered nothing.  

I want to use it more but can't and will be moving my account in the very near future.

Ketharaman Swaminathan

Ketharaman Swaminathan Founder and CEO at GTM360 Marketing Solutions

@IgorA + 1. Much as I'm a tech marketer and would want to claim that technology determines a bank's fate, technology is only an enabler. Claiming that banks are incapable of innovation because they use legacy systems is like claiming that Apple is incapable of innovation because iOS apps are written in the 1980s era Objective C programming language. With whatever technology it uses, banking is the most profitable industry in FORTUNE 500 (Source: FORTUNE article http://ow.ly/d/3jtk). 

Igor Ageyev

Igor Ageyev Enterprise Architect at GMIA

@Ketharaman - thanks. One note to the innovations point: from my point of view there are different types of innovations and only some of them directly based on technology. As a matter of fact thechnolofy based innovations are not the most complex, efficient and long lasting.

Business and commersial changes initiated or supported by technology make real deal and deliver real benefits for those innovations.

The most technology edvanced sector  of economy was hard landed to reality  together with .Com bubble bust.

Banking industry, as one of the most technology based, need to keep that in mind when planning innovations.

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