When I heard that the Royal Bank of Canada is starting to outsource some services to India this year, I had an initially negative reaction. Like most people, I incorrectly assumed that if a bank has “Canada” in the name it would have some responsibility, even peripherally, to the welfare of the Canadian economy, job sector, level of service and just generally the Canadian market. This is, obviously, a fallacy. Like all banks, including the Bank of Canada, issuer of Canadian money, the Federal Reserve, issuer of US currency, and most other similar institutions, they are private for-profit corporations.
It is quite certain that somewhere in India a lucrative deal has been struck that will considerably reduce the costs of keeping the business running by removing the pesky need for employment insurance, costly deductions, health insurance, retirement funds, decent working conditions, etc. About the only good news, really, is that there are a lot of poor people in India that stand to get a job paying peanuts, and an Indian Mr. Moneybags will make a tidy profit from their reassignment to telephone call duty from whatever unemployment, or terrible jobs they may be currently forced into.
So since RBC has no responsibility whatsoever to keep jobs in Canada, and offshoring jobs is likely to be very lucrative for a few chosen individuals, it stands to reason this will go ahead. And as more and more jobs transition out of Canada to Bangalore, or other parts of India, the image of the bank will gradually change in the public eye.
Of course, current management stands to gain significantly, as profits in the short term will rise, expenses will go down, and their balance sheet will be stellar. These same managers will take great care, I’m equally sure, to be gone by the time the real impact of these changes on the business will begin to appear in a few years from now.
The real impact I am referring to, negative impact, will come when the services level is inevitably reduced to a point that even internal employees will be complaining and customers close their accounts. I foresee many a lengthy discussion, mostly consisting of misunderstood English being repeated to someone with a total of 4 weeks of English classes (standard training in Bangalore), only to be told they can’t help with that particular problem, and they don’t know who can. (Not making this up, actually. Happened to me with Dell)
Oh, Dell, you silly corporation…
I remember well the downward slide of my favourite computer manufacturer, when they outsourced their service center to Bangalore between 1997 and 2004. Then Michael Dell resigned, at the top of the game, with the company looking great.
By the time the corporation realized the huge mistake off-shoring had been, and that their after-sale reputation was all but destroyed by their Bangalore service center it was too late. Over the next two years, despite superhuman efforts both in returning call centers to the US, aggressive marketing campaigns and expensive ads, Dell consistently lost market share until, in 2006, it was no longer the #1 manufacturer in the US.
Rollins, their CEO resigned, taking the blame, Michael Dell came back intending to be a saviour, but despite his own best efforts, by 2009 its stock was completely down the crapper trading for less than a quarter its value during the peak years when Michael Dell originally quit. Dell simply never recovered, despite doing cool things, like buying Alienware.
Now I’m not saying that the reason for Dell’s decline is strictly customer support related. Dell’s low R&D spend, increasingly cutting corners on component quality and a maturing desktop market were all to blame, but the perception of poor support, and poor customer service, more than any other element, contributed to people who were sold on Dell, like myself, to hesitate, slow, and stop buying Dell altogether. Of course, when they started catching on fire… that didn’t help sales either.
Let me close the Dell parenthesis and say that the bottom line is that I’m not going to cry if in 10 years time there is one less bank of “Canada” in Canada, or a significantly weaker bank at RBC.
Go for it! I can’t wait to see what happens. I wouldn’t be surprised if RBC management take off before the shit hits the fan only to come back later when the reputation of their successors is destroyed, like Dell did, and try to revive a company on the brink of death.
My reaction isn’t all that negative now. It will make for an interesting case study.
FYI, Dell isn’t out of the woods yet, either.
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