Monday, October 10, 2005

Outsource Me?

NEW YORK, NY – The high degree of Business Process Outsourcing (BPO) of various payroll, benefits, and computer programming positions to lower cost countries such as the Philippines, Brazil, and, of course, India has had an intense effect on America’s middle class. What analysts predict to be the next outsourcing wave, Knowledge Process Outsourcing (KPO), however, will affect even the most elite of America’s workforce. By 2010, approximately $12 billion dollars of US knowledge workers will be outsourced to India, a large portion of this figure coming from investment banking related activities (financial analysis, equity research, pitch book creation, etc.).

Already, banks such as Thomas Weisel, JP Morgan Chase, and even the coveted Goldman Sachs have begun outsourcing investment banking activities to Indian companies such as Office Tiger. The labor arbitrage play is large: students from top Indian MBA programs working for $25,000/year compared with the lofty $100-$145,000 salaries for comparable U.S. workers.

But can Indian workers really handle the extremely intense and complex work our Ivy League graduates toil over day and night in the streets of the Financial District? Could the work so advanced that analyst positions are sought after by thousands of top American students each year be such a common commodity?

“Are you kidding, yeah?” offered Lalloo, a recent graduate of prestigious IIM Ahmedabad (Indian Institute of Management), speech lathered with unfamiliar dental and guttural sounds. “This is like a joke, dyude. ‘Discounted Cash Flow,’ ‘Comps analysis,’ ‘Accretion/Dilution.’ All this so-called modeling is just glorified arithmetic. This makes call center work look like brain surgery. And the silly Americans are so impressed when we spice up our work with little tricks in VBA. They teach that the equivalent of your fourth grade over here!”

“And we don’t even touch the pitch book shit here. We outsource that to China.”

When asked his opinion on the increasing role of Indians in these more high-value processes, Lalloo became emotional.

“So, you thought we were only in the back office, huh?” he questioned rhetorically, increasingly angry. “But we are sly like the fabled mongoose! We started in the back and have crept into the front office!”

“Yeah! We’re gonna call you to fix our computers now, Jack!” chimed in an overexcited colleague, Samir.

Managing Directors do indeed seem to be pleased with their Indian workers.

“These resources are great,” commented Walid Chammah, head of Investment Banking at Morgan Stanley. “We send them an email at the end of the day and by morning it’s done! These guys must literally not sleep at all,” expounded Mr. Chammah, ignorant to the concept of time-zones. “And the best part is they don’t ask me all those obsequious questions like the analysts here: ‘So tell me about how you got to your position?’ ‘What can I do to really add value for the firm?’ Blah blah! Damn the incessant sycophants. I wish we could send all their jobs to India!”

But the lower-rung 6-train-to-Fulton-Street crowd is not as thrilled with situation. We were able to catch Brandon F. Wall, a Goldman Sachs analyst, while he gobbled steaks at Peter Luger’s with his entourage of banker buddies.

“Outsource me? Are you kidding?” scoffed Brandon, jabbing a slice of meat indignantly. “I’m not scared of no Indians. I mean, they do a decent job tailoring when my boys at Gieves & Hawkes are busy. But, I mean, I’m from Greenwich, Connecticut. Greenwich! Tell that to Mr. Patel. This is pure blood right here. Born-banker, son! Unless all the MD’s pack up and move to some obscenely affluent suburb outside of Bangalore, I don’t think there’s a problem.”

Melissa Kim, a 2nd year analyst at Bear Sterns from Iselin, New York, was a bit more intimidated.

“When I graduated Summa from Harvard in Electrical Engineering, they told me I’d really be using my ‘analytical skills,’” began Melissa. “Now, I do the same thing everyday, all the time. I realized about 3 months in that a monkey could be doing my job. Indians are probably just as smart as monkeys,” explained Melissa, skeptically.

Then, the magnitude of the situation seemed to settle in for Melissa. “But…I guess I can’t really do anything else anymore…” she stammered, inundated by reality. “I tried to help my little sister with a physics problem the other day, but I couldn’t figure out how to solve it in Excel so I had to give up. She’s in 7th grade!” she recounted, tears forming in her eyes. “I was All-State Math Team in high school, and now look at me. This is all I know! What will become of me?” sobbed Melissa, falling to her knees and breaking down into a full weep.

Melissa’s fear might not be unmerited. The increasing outsourcing of investment banking positions to India will definitely impact our upper class workforce, and graduating students will have to adapt. But how? At Princeton, Dean of Students Kathleen Deignan and Career Services Director Beverly Hamilton-Chandler seem to be stumped as of yet. They refused to give a full interview but remarked, “Maybe they could all just go into consulting…”

The future of investment banking and many other knowledge-based industries is bound for transformation. And while there might be incentive for banks to keep a few junior analysts to breed their next batch higher-ups, it seems likely that the investment banking analyst will be headed toward the fate of the American software developer…extinction.

Sources:
1) Financial Times, “Banks move analysts’ work to India,” August 20, 2003.
2) Business Standard, “Goldman to set up BPO unit in India”, February 5, 2004.
3) Financial Express, “India may garner 71% market share in KPO by 2010,” May 6, 2005.
4) Investment Dealers Digest, “Mid-Market Firms Join Outsourcing Bandwagon, Thomas Weisel rumored to be considering outsourcing equity research functions,” September 12, 2005.


34 comments for this post.

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  1. -2 votes + -
    flashbang Said:

    Wow, that?s kind of scary. I hope to god this doesn?t really take off for a few more years, or atleast until I get into the industry..

  2. +11 votes + -
    Vertigo Said:

    This is hilarious. Please underline the title (single accounting), enlarge the graphic, change the font to Garamond and leave 12 copies on my chair for tomorrow morning. Oh, and footnote everything. Especially every single reference to India.

  3. -7 votes + -
    Anonymous Said:

    indian out sourcing willfix the main problem with the 20-something crowd. no on owes you living. more importantly it?s not like any wharton/harvard/spoiled pvt college grad actually possess crtical thinking skills

  4. -8 votes + -
    Anonymous Said:

    But can Indian workers really handle the extremely intense and complex work our Ivy League graduates toil over day and night in the streets of the Financial District? Well let me tell you from first hand experince that the working culture evolving in india is much much hard working than whats there in united states.

  5. +10 votes + -
    Anonymous Said:

    ‘indian out sourcing willfix the main problem with the 20-something crowd. no on owes you living. more importantly it’s not like any wharton/harvard/spoiled pvt college grad actually possess crtical thinking skills” obviously you went to a state school?. this may be more your speed: http://www.leveragedsellout.com/2005/09/boutique.html

  6. -3 votes + -
    Anonymous Said:

    Apparently they didn?t teach ”attention to detail” at your investment bank. You left out the ”a” in Bear ”SteArns.”

  7. +7 votes + -
    Anonymous Said:

    The U.S. has nothing to worry about. All the legit Indians come here and stay here. Like my pal Dinakar Singh.

  8. +5 votes + -
    Anonymous Said:

    The IIM grads don?t do this excel shit the top of the class are getting offers in the $200K range in India – the arbitrage in greater $150K to maybe $15K for a second tier (motivated) XLRI grad?it is fucking scary?some unnamed hedge funds are allready leading the pack with the KPO arbitrage play. And for those of you that think the pay will eventually equalize ponder on this?the Indian population has over 200MM college graduates and a population of over 1.2B – staggering statistics. What will happen is that for lower level excel gymnastics US graduates will need to train in India and come back at higher levels (as evidenced by what is happening in the software industry).

  9. -11 votes + -
    Anonymous Said:

    You obviously don?t work in the financial district. The 6 train doesn?t go to Fulton Street.

  10. +11 votes + -
    Anonymous Said:

    6 train to fulton st is a reference to boiler room. yeah, they made a mistake in their script

  11. +5 votes + -
    Anonymous Said:

    What?s scary, flashbang, is that I recognize you (stated name and implied age) from Vault message boards. ”Have I become as corrupt as I abhor?” -Tracy Chapman ”Did that loser just quote Tracy Chapman?” -the next arrogrant prick to post after me

  12. -5 votes + -
    Anonymous Said:

    ‘Well let me tell you from first hand experince that the working culture evolving in india is much much hard working than whats there in united states.” Yeah, I?m really scared that this guy who doesn?t even have a grasp of English grammar will take my job. Oooh, so scared. Make me a tikka marsala, bitch.

  13. +1 votes + -
    Anonymous Said:

    It is pretty funny b/c it will probably happen. I have no doubt that some guy in India can do the same basic excel work that analyst in the US do but I would never let him make a pitchbook. It?s like w/ computer programming they send a lot of grunt work to India but usually the only Indians doing high level coding live in America.

  14. +2 votes + -
    Anonymous Said:

    Did that loser just quote Tracy Chapman?”

  15. +13 votes + -
    Anonymous Said:

    ‘Yeah, I?m really scared that this guy who doesn?t even have a grasp of English grammar will take my job. Oooh, so scared. Make me a tikka marsala, bitch.” This guy is truly a fucking scholar. Claims that people in India don?t know their grammar. Well you don?t know your spelling, bitch. It?s fucking called fucking masala, not marsala. India is known for spices, not fucking Olive Garden platters. Masala is an English word too. If you?re gonna fucking insult us, at least don?t fuck it up. ”Make me tikka masala, bitch” is what you meant to say, not ”a tikka marsala.” By the way, there?s more English-speaking people in India than there is in America, so fuck you and goodnight. Now if you?ll excuse me, I gotta get back to the Kwik-E-Mart With Love, An Indian

  16. +3 votes + -
    Anonymous Said:

    Dudes, If you?re in banking, just look around you. Already there are tons of Indians in the field. Some of the best MD?s are also of South Asian origin. And yeah, the Indians living in US, Europe, HK/Tokyo, may be a bit more culturally diverse than those raised in the mother land. So, instead of paying loads of money and getting an Ivy league (born-banker)kid, it just makes more sense dishing out a fraction of the money and taking on someone else who covets the job more and doesn?t bitch and moan as much. Of course, that is unless your dad owns a Fortune 500 company or is looking to take his private company public. Of course, Banking ain?t about profitability, but just about image. You will thus always need your stereotypical preppies when facing MidWest US corporates etc? Yes, I?m proud to be Brown too and that makes me more replaceable? unless I can bs about holding some added value

  17. +7 votes + -
    Anonymous Said:

    Funny thing about the 6 train, most likely you don?t have to take it to mid-town manhattan. Most of the investment banks are located there and only have trading operations downtown. -Banking born and bred, soon to be working corporate job with half the hours (and pay) and having happy hours with Bob from accounting and Steve from marketing.

  18. +5 votes + -
    anonymous Said:

    Yeah, Im really scared that this guy who doesnt even have a grasp of English grammar will take my job. Oooh, so scared. Make me a tikka marsala, bitch.??? How classically misguided. Reminds me of the Detroit autoworkers or Silicon Valley scrubs. ”no slanty-eyed gook or curry-eating injun is going to take my job. they talk funny.” I?m afraid to inform you that you are very replaceable – and given the idiocy of your comments – probably useless as well.

  19. -1 votes + -
    Anonymous Said:

    The comments on this fake blog are even funnier than the blog. I outsource all my programing to India and Russia for $25 an hour and if I could outsource my Alpha creation there I would do it. p.s., I didn?t bother to go to college, I just use college graduates as tools, but I would just as soon use someone with more skill and less attitude any day.

  20. +2 votes + -
    Vinit Said:

    I watch Bollywood, not Hollywood. I prefer Indian food to Indiana food. The problem is often ethics. My personal experience with a lot of dot-coms run by Indians is ”a culture mired in bribery and corruption?” check out the following story at: http://seattletimes.nwsource.com/html/businesstechnology/2002198103_dotcon1main06.html Enjoy?. but watch your back.

  21. 0 votes + -
    Anonymous Said:

    This is a joke, right?

  22. +4 votes + -
    Vinit Said:

    It?s no joke buddy. Some people come from nothing and through various means (some of which would make even a policeman from Bhind feel guilty) build their empires on the backs of other, claiming it?s because they are smart and are ”big thinkers”. The reality is that this ”South Asian Nouveau Riche” cherish their Audi TT?s and Amitabh Bachchan looks more than their fellow human beings. The real thinkers are those that build an empire based on a true product or service and employ people; offering something useful to society instead of funding their personal stock market ecstasies.

  23. 0 votes + -
    Analyst777 Said:

    Guess what everyone, according to the recent ?Business Week? article, big corporations and investors of BPO more likely to outsource from Bucharest-Romania, Dalian-China, Latin America and some other european countries. Briefly the reasons are the time difference, distance, cultural gap, experience etc..

  24. +4 votes + -
    Anonymous Said:

    sorry guys, if someone can do your job just as well for less, it doesn?t matter how they speak, you?re replaceable, period. Next time you see two identical products on Amazon.com, why don?t you be consistent and buy the much more expensive one.

  25. -3 votes + -
    Anonymous Said:

    ur a fag

  26. -3 votes + -
    Anon Said:

    Well, I’m working with an American Bank here in India, and let me admit that I’ve come across some of the dumbest people in my life in this Bank. People who are associates, and dont know a thing about VBA and excel macros!

  27. -2 votes + -
    Desi Idiot Said:

    Lets talk about free markets baby. though i am sure, in a couple of decades even the clients and biggest firms will be in asia, so problems with the time zones as well. What has happened in detroit might happen on Wall Street as well. but till then I am happier to make most of trading job in London with an American Bank

  28. +8 votes + -
    Anonymous Said:

    I think you people should emigrate. I am white and decided to go offshore to India to manage the transition as they say. On just 100k per annum (given a western salary still) one can live like a Maharaja. It?s great, I don?t wait in line for a black car at night, I have a personal driver 24 hours a day for the price of my cell phone bill back home. I also have two servants. NYC is a rip, and there is no dearth of cute expat brit and american girls out here. I am only 24.

  29. -2 votes + -
    Anonymous Said:

    You?re rigth, ”people should emigrate”, you have followed your ideas and now, as you say, you have got a dreaming life !

  30. -1 votes + -
    anonymous Said:

    Yo jack (/dick/tom/peter/+++K ball? sell the caddilac buy a house in goa and a maruti in bombay?. and change your name to Navel or dinkar or rahul cause you might get away with it but yre kids r gonna be out of a job at this rate. Do the math, Bitch.

  31. -1 votes + -
    Anon Said:

    If Indians have already taken over the software industry, why are they paid less than 1/10th the rate?

  32. 0 votes + -
    For dogg pound gangsta Said:

    Pakis

  33. -1 votes + -
    I-Banker Said:

    I?m at one of the big 3. Our Mumbai team are absolute r#t#rds, really? if you really want to scare them when they ask you the same freakin question twice, say: ”ok now, use your judgement, just use some common sense!” ?

  34. 0 votes + -
    Anonymous Said:

    6 Train to Fulton St? Move back in from the ?burbs dude.

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