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 U.S. professional 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.
Countries such as 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.
''We're talking about very highly educated people with advanced degrees, who are very motivated,'' said A.T. Kearney managing director Andrea Bierce.
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,'' Bierce said.
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 would move a total of two 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.
