Wachovia Corp. plans to outsource some of its technology work to India under a cost-cutting initiative announced earlier in the year.
"As we expand our customer base globally, this becomes an opportunity to source work globally as well," said Doug Caldwell, a Wachovia spokesman.
Wachovia has overseas operations in cities including London and Hong Kong, Mr. Caldwell said in an interview Wednesday. It informed approximately 2,700 employees on Tuesday that their jobs may be included in the outsourcing plan, he said.
He also said that the company had 160 vacant IT positions, which would either be either kept in-house or outsourced. Wachovia announced in January that it wanted to cut its expenses by $1 billion by 2007 and that it would eliminate as many as 4,000 jobs in doing so.
Wachovia has 19,000 employees in its hometown of Charlotte, but the technology jobs most likely to be affected by the India outsourcing are scattered throughout the United States.
Mr. Caldwell said Wachovia has been evaluating proposals from several outsourcing providers for nine months. He said it has not signed any contracts but expects to distribute work to three outsourcers: Infosys Technologies Ltd. of Bangalore, India; International Business Machines Corp. of Armonk, N.Y.; and Cognizant Technology Solutions Corp. of Teaneck, N.J. All the work will be done in India.
Wachovia has not decided just what work it will outsource or determined exactly how many U.S. jobs will be affected, though they will all involve software application development and maintenance, Mr. Caldwell said.
The vendors "will come in and look at our portfolio and identify from them the work that will be sent offshore," he said. Some of the maintenance work will remain in-house.
Wachovia has worked before with IBM and Cognizant and has experience with offshoring. It is switching from its own online banking software to a program developed by Corillian Corp., and the Corillian software is being tested in India by Accenture Ltd.
Madhavi Mantha, a senior analyst at Celent Communications LLC in Boston, said software maintenance is "the low-hanging fruit of outsourcing" because it is "a huge proportion of the cost. A lot of IT expenditure goes to maintaining existing applications."
Maintenance costs are about 82% of any bank's software budget and that the rest goes to developing new software, Ms. Mantha said.
How much Wachovia saves will depend on what tasks it decides to pass off to the vendors in its final contracts. But Ms. Mantha said that in general outsourcing can cut a bank's technology costs by 20% to 30%.
"It's not terribly surprising to me that this is going on," she said. "Most of the top 50 banks are exploring" business-process outsourcing, "and in a lot of the cases they're looking at IT" as well.
Even the employees most likely to be affected "have not been oblivious to the fact that this might be coming," Ms. Mantha said. "Over the next two years we'll see a lot more of this type of announcement."
