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2003-09-22 03:15:35 UTC
to send more work abroad," Boston Globe, 6 May 2003 [page 17]
JP Morgan Chase & Co. plans to outsource some of its stock market
research to Bombay this summer, signaling possible new arenas for the
trend that already has sent tens of thousands of information
technology jobs abroad in recent years.
A surge in overseas hiring could result in major job losses inside the
US financial services sector. Business consulting firm A.T. Kearney
Inc. last week released a survey of 100 major American banks,
brokerage houses, and insurance companies, projecting half a million
financial services jobs will be shifted overseas in the next five
years, equal to 8 percent of total employment in the sector.
The practice of outsourcing may be catching on among financial
services and business consulting firms for the same reasons that
computer software companies such as Microsoft Corp. and IBM Corp. are
increasing their use of overseas labor. Countries like India offer
sharply lower labor costs, while supplying workers with excellent
technical and financial know-how. For instance, in 2001, MBA graduates
from the prestigious Indian Institutes of Technology could expect to
earn just $12,000, compared to an average starting salary of $102,338
for graduates of Harvard Business School.
New York-based JP Morgan said last week that the analyst research
reports it prepares for stock investors will soon be prepared in part
by Indian business school graduates working in Bombay. Meanwhile, A.T.
Kearney said it is already having much of its research done by Indian
''We're talking about very highly educated people with advanced
degrees, who are very motivated,'' said A.T. Kearney managing director
For decades, financial services companies like Citigroup and GE
Capital have shifted some of their business activities overseas. But
traditionally this has involved relatively low-level work, such as
typing huge volumes of data into computers or handling simple
bookkeeping activities. That trend has accelerated in the past five
years as companies have sought to lower their costs to remain
But the move toward sending financial research abroad comes at a
sensitive time for Wall Street. Last week, 10 top investment banks
firms reached a $1.4 billion settlement with regulators aimed at
protecting investors from biased research. It was unclear whether the
settlement would speed the outsourcing of analyst work overseas.
''With the market for financial institutions not turning around, and
not seeing the revenues that they'd hoped, financial institutions have
had to continue to look for ways to reduce costs,'' said Bierce.
Indeed, beginning about a year ago, A.T. Kearney moved much of its own
research to India. ''One [reason] was as a way to reduce our overall
costs,'' said Bierce. ''But two, we could take advantage of the time
change.'' Bierce said that she can e-mail a data request to an Indian
colleague who's at work while she's at home. The next morning, the
information is waiting in her e-mail box.
Another research firm, Deloitte Consulting, said the financial
outsourcing boom isn't limited to the United States. Last month,
Deloitte analyst Christopher Gentle predicted that financial firms in
the major industrialized nations would move 2 million jobs to low-wage
countries over the next five years, with about half the jobs going to
India. Gentle estimated that the shift could save the world's 100
largest firms $138 billion a year by 2008.
JP Morgan Chase spokesman Brian Marchiony said his company isn't
laying off American analysts in order to hire Indian MBAs. Instead,
the Indian workers will do the heavy-duty number crunching, freeing up
the Americans to focus on higher-level financial analysis, and letting
them spend more time with customers. ''We will not only increase
productivity for senior analysts inside the US, but lower costs for
the overall department,'' Marchiony said.
It's unclear whether investors would be comfortable with financial
advice based on offshore analysis. Stock analysts are presently
laboring under a cloud of scandal. Charges that high-profile analysts
gave investors inaccurate information to help their firms chase
investment banking business led to last week's settlement between
regulators and securities firms.
But SEC spokesman John Heine said that having part of the analysis
done overseas shouldn't matter to investors, because it doesn't matter
to regulators. ''If the research is being put out as a product by the
investment bank, the investment bank is responsible for it,'' Heine
said. ''It doesn't matter where the people putting it out work.''For
now, other major financial firms don't seem in a hurry to follow JP
Morgan Chase's lead. Representatives of Boston-based Fidelity
Investments and Putnam Investments said that the firms have long had
analysts based outside the United States, but not for purposes of
reducing labor costs. Both firms say they have no plans to shift
analyst work to India or other low-wage centers. Similar responses
came from Merrill Lynch & Co., Solomon Smith Barney and Goldman Sachs.