The Hindu Business Line : Shipping research jobs to India: Will it work?

From Wall Street to Dalal Street? Wall Street research analysts, a much-besmirched lot lately, now have to worry about losing their jobs entirely. A proposal to outsource research jobs to India and other countries is apparently being considered by Morgan Stanley, Goldman Sachs and Citigroup, according to a Reuters report.

Morgan Stanley plans to hire stock analysts in India to support its US and European analysts, Deutsche Bank has hired a London-based consultancy that specialises in outsourcing to India, and J.P. Morgan Chase has said it will hire 40 junior stock analysts and research analysts in its Mumbai office this year.

More Wall Street banks are expected to follow suit as they beef up their research departments while coping with shrinking revenues from equities underwriting and a tighter regulatory environment in the US.

Separately, a recent Deloitte report indicated that up to one million jobs from the world's largest financial services companies could move to India in the next five years - and that these jobs would go beyond the typical "small IT shops" of financial institutions.

Merrill Lynch already outsources technology services to India, and Citigroup has offshore operations in India for its commercial bank. And a A.T. Kearney report said that US banks and financial services companies alone plan to outsource 5,00,000 jobs over the next five years.

Certainly, research only accounts for a small portion of these jobs, and the banks plan to initially outsource only data collection, basic number crunching and creation of finance models, which will essentially provide support for senior analysts. But there would be a progression to more complicated tasks, it is believed.

"The system is already working very well for many consulting firms (like McKinsey), so these banks would essentially follow the same model," said an equity analyst. "You can get very good talent here, and very good analytical ability, and the cost differential is huge."

Besides, data is available at the fingertips now, and teleconferencing and videoconferencing - if needed, would still cost less than having an analyst in New York, said Mr Arun Kejriwal, of Kejriwal Research & Investment Services. "The only problem is that disclosures are a lot stricter in America, and we will come under Indian laws," Mr Kejriwal said. "So clients may question the validity of the research."

Another industry expert cautioned that while outsourcing to India is a validated concept, there may still be a level of scepticism in this sector. "It will all depend on the profile of the function - how core is it, and how critical is it," he explained. "If it is a core competence of the firm, it will take some time for people to be comfortable with the idea of outsourcing." There is also the political factor - like the New Jersey Bill to bar outsourcing of operations of government enterprises to outside countries. There is also a fear that cultural differences could lead to inefficiencies, besides the threat of geo-political tensions in India.

For now, outsourcing would work best for basic data collection, said Mr Asit Koticha, MD, ASK-Raymond James. "Even the cost advantage may not be that substantial, as analyst costs are fairly high in India, too," he said. Eventually, though, the benefits - to Wall Street banks and to Indian analysts - outweigh the perceived negatives.

"Anything that gainfully employs people here would be a positive," the equity analyst said.

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