Random Reader Reaction

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.