May 6th, 2008 admin Posted in Uncategorized | No Comments »
DATE: May 6th, 2008
UBS declared yet another dismal quarter results and will lay off 5,500 people this year to trim their workforce primarily in the US and UK. The number although less than what people feared (8000+) will put UBS out of the big league investment bank and pull it out of the race to be ever one. The path to fixing the reputation for UBS has to start yesterday given that the reputation impact on UBS has started to affect its core wealth management business. This quarter the bank saw their clients pull back net money from the bank around 12.8 billion Swiss francs compared to an inflow of 52.8 billion Swiss franc a year before. This is the first outflow of money in UBS since 2000.UBS operates out of some high cost locations around the world and for over the last few years has been actively pursuing a strategy to build operations and infrastructure to operate from low cost locations (relative low cost locations today!) in India and Eastern Europe. Supposedly the center in India has grown dramatically, based out of Hyderabad the UBS center in India has over 1500 people now doing all sort of works. If you look at UBS job postings in India over the past six months you get a sense of the areas where the Indian operations seem to have grown. I think the interesting question is now going to be that with UBS having a mature offshoring platform ( I hope so) and hopefully beyond the investment phase will the Indian offshore operations be able to cushion the slow down and provide the leaner and meaner ( and cheaper) infrastructure to support the trim down business. In businesses where there is no business any more – fixed income, muni’s where the entire departments are being shifted the offshoring strategy is simple. There is no offshore strategy for a business which does not exist.The interesting thing will be with potentially budgets getting tighter and tighter for support services – operations, IT and everything else which is required to support making money, will the offshoring provide these functions a lever to do ‘MORE with LESS’.My feeling is that the impact of financial services carnage in the market place and the ones which have their captives has to be pretty steep for the captives. Captives have to justify their existence and why they should not be sold to third parties and their cost structures have to come in line with market expectations and realities. Good or bad financial services were the leaders in building captive centers in India and some of the initial players to build a captive presence in India. With the fight for talent heating up in India these captives have continued to operate as extensions of their onshore divisions – higher paid than the rest of the world. This has caused the anomalies and higher wage growths in India for skill set which was perceived to be more valuable.Leaders managing or operating captives today in financial services should be working extra hard to put a strategy in place where they can either emerge as saviors from this crisis or will be crushed and made irrelevant as just another cost line item.I will love to hear from people working in the industry on their views.
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