Technology allows all sorts of work to be done anywhere. Many companies are taking advantage of this power to shift European operations to from pricey major capitals to lower-cost locales.
Early in June, Goldman Sachs CEO Jamie Dimon warned that “Brexit” could cause 4,000 of his UK employees to lose their jobs. What he did not mention is that many of those jobs—and hundreds of others—are already at risk.
Location, location, location: Globalism is plucking a new riff on that old business adagio. With technology de-linking work from place, companies have been “nearshoring”—shifting jobs from expensive European and American financial hubs to cheaper cities nearby, such as Warsaw, Belfast or Budapest.
“Business processes in the banking sector are increasingly relying on technology, which makes them location-free,” says Julia Kotlarsky, professor of technology and global sourcing at the Aston Business School in Birmingham and co-author of The Handbook of Global Outsourcing and Offshoring. “Plus, in some cases, laws and legal requirements prescribe that customer data cannot leave or be managed from outside EU.”
The trend has picked up considerable pace this year. Morgan Stanley said in January it was planning to move some of its jobs to Budapest. BNP Paribas, meanwhile, was gearing up to hire a thousand more workers in Lisbon. Goldman Sachs is bulking up its new technology unit in Warsaw. Poland is also a favorite destination of Credit Suisse: Its subsidiary in Wrocɫaw, currently hosting 4,000 workers, is making room for more as the Swiss giant shifts 1,800 positions in London and 1,600 in Switzerland. Citigroup has been moving employees from London to Belfast. In May, HSBC started transferring 840 infotech roles out of the UK.
“Nearshoring to places like Dublin, Lisbon, Warsaw and Budapest represents another form of dividing labor between different locations,” says Armin Heinzl, chair of general management and information systems at the University of Mannheim. “Homogeneous and standardizable processes is the key to the kingdom in this game.”
Functions that go nearshore are usually back-office and middle-office operations, or contact centers. Ilan Oshri, professor of technology and globalization at Loughborough University and Kotlarsky’s co-author, notes that “banks are realizing these functions have to be aligned with the bank service value chain to ensure front-office efficiency.” Many European locations now offer the talent needed at lower costs. In other words, if Jamie Dimon wants to stay competitive, his options are limited.