What does the Lloyds hire and fire mean for UK IT?

Computing questions the banking industry about legacy IT, retraining and offshoring

Last week Lloyds Banking Group (LBG) announced that it would be making almost 1,000 staff members redundant in its latest round of restructuring: one quarter of them in the IT department.

The bank has been steadily reducing IT staff numbers for years, following its acquisition of Halifax Bank of Scotland (HBOS) in 2008. Most recently, the bank cut 640 staff in 2016 and almost 2,000 last year, in addition to the 250 it has just announced.

Lloyds is somewhat mitigating the loss by taking on 150 new staff, for a net reduction of 98 IT roles. "These changes are being driven by advances in the technology we use to ensure we respond to our customers' needs in a fast and efficient way," it said in a statement released at the time.

Although the bank wouldn't elaborate on its initial statement, other members of the financial industry agreed that the move was probably taken in a bid to bring new skills into the business.

"We are moving away from traditional waterfall development and the frameworks that support that culture, to agile, cloud-based continuous development," said Rory Alsop, head of information security oversight at RBS and University Liaison contact for ISACA Scottish Chapter.

He continued: "So certainly some of the move is to gain developers already skilled in the newer ways of working - that's possibly quicker than retraining, and does have some cultural advantages - but it loses experience from an organisation.

"The slightly cynical view is that sometimes it's just a cost-saving exercise - but I would say more that it's really driven by this move towards cloud and rapid deployment and agile. It's a different set of disciplines."

As a high street bank, Lloyds is undergoing a period of massive change, with consumers increasingly turning to mobile apps and borrowers bypassing financial institutions entirely. The sector is being disrupted by new institutions that have built themselves for the modern age, without the technical debt that haunts rivals.

Greg Hawkins is chief technology officer of Starling Bank, one of the new breed of disruptive mobile-only banks, launched in 2014. Although he didn't want to comment on the Lloyds case, specifically, he had this to say about the wider sector:

"We've seen several incumbent banks changing their approaches over the last few years, as they struggle through agile adoption and trying to make themselves effective and deliver at a modern pace. They are all struggling with legacy architectures, legacy hardware, legacy methodology - and ultimately organisations that are quite set in their ways.

"There's a risk any time that you fire anyone that some of your intellectual capital goes with them - and I think in making that decision that people have to evaluate that risk," he added, agreeing with Alsop.

More than a lack of skills, Hawkins believes that it is a lack of agility that holds large firms back: "Many people who've worked in large organisations often have this feeling of wading through treacle in order to get things done…

"One of our major advantages is that we're not grinding our way through an agile transformation. We skipped all those phases of our lifecycle, and we can just do great technology with a small group of very talented individuals that we try and remove the roadblocks from."

What does the Lloyds hire and fire mean for UK IT?

Computing questions the banking industry about legacy IT, retraining and offshoring

Offshore to Bangalore

When Lloyds cut 2,000 IT staff last year, it outsourced them to IBM and then moved those roles offshore. David Mullins, a partner at consultancy Elixirr, whose clients include several well-known banks, thinks that this is a symptom of a larger transition in the IT sector.

"Over the last several years there's been a lot of standardisation of service management and IT capabilities. A lot of [service management] now is being driven out of self service…

"People are [also] now beginning to introduce platform-type concepts around IT. Micro-services and APIs have become very popular in the industry, where people are now able to wrap their legacy technology and create an exposed service that other people can render, rather than it having to be done within the organisation itself."

The rise of platform-as-a-service means that there are fewer time-consuming, labour-intensive tasks to do in day-to-day IT, and that has split the market.

"The skillset is beginning to fracture along the lines of large-scale repeatable services, and another talent pool around the areas of innovation, digital transformation and customer journey transformation," said Mullins.

Danny Healy, a technology evangelist with software vendor Mulesoft - who has worked with banks like Barclays and HSBC - thinks that legacy system expertise will still be valuable to modern banks, and could lead to on-the-job retraining:

"Some of those older systems... have been around for a long time. Mainframes still underpin much of the customer banking services in the UK with the bigger banks; that's not going to change in the short term. If you've got mainframe skills, those will still be relevant within a bank.

"However, how you expose the capability of that mainframe will change; it'll be through APIs and it'll mean that your team will be able to operate independently and just worry about mainframe concerns…

"Those older skills will still exist within the bank, they'll just surface their capability in a different way, and that will give a path to those individuals to learn new skills over time."

Mullins, on the other hand, expects banks' technical debt to be farmed out to countries where the work can be achieved at a lower cost: "The traditional IT operations…that are more routinised lend themselves to being done not just in an outsourced fashion, but actually being done offshore."

The finance industry is increasingly moving legacy UK IT jobs overseas. Several companies, particularly in India, specialise in maintaining old but important systems for a comparatively low cost.

"[Legacy IT specialists] are typically paid more because they've been there for a long time, there's a big pension overhead associated with them, and they represent a liability for the company," said Mullins.

Alsop agreed with Healy that retraining existing staff is key, especially in the security area, but Hawkins said that such a move cannot solve all of a bank's challenges.

"I think [that] a legacy high street bank has many more obstacles in their path than a skills and expertise mismatch... All in all, you can't turn those sorts of organisations into fast-moving high-performing engineering units by addressing only one aspect.

"There's no doubt that a mismatch is an issue that they need to tackle, and of course that can be done by retraining, and it can be done partially by hiring and firing.

"But it takes much more than having smart experts to build a crack delivery unit. Some of the smartest people that I know work in legacy banks - that doesn't make those banks deliver more effectively."