Cost Cutting in New York, but a Boom in India

By: TraderMark Friday, August 15, 2008 10:37 AM

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Instead, jobs are popping up in places like India and Eastern Europe, often where healthier local markets exist.

In 2003, JPMorgan and Morgan Stanley said they planned to move a few dozen research jobs to Mumbai, Lehman Brothers was working on a pilot program to create research presentations in India and both Merrill Lynch and Goldman Sachs said they had not moved any research to the country. Five years later, the trickle is a flood. Third-party firms say they are seeing a 20 to 40 percent upswing in business this year alone.

Morgan Stanley has about 500 people employed in India doing research and statistical analysis. About 100 of Goldman Sachs’ 3,000 employees in Bangalore are working on investment research. JPMorgan has 200 analysts in Mumbai working for its investment banking operations around the world, doing industry analysis, and compiling data and charts for marketing materials. It has an additional 125 analysts in Mumbai supporting the bank’s global research division.

Citigroup employs about 22,000 people in India, several hundred of whom work in investment research. Deutsche Bank has 6,000 employees in India, according to the bank’s Web site.

The jobs off-shore are more likely to come from the investment bank and trading divisions of Wall Street firms, rather than the sales side, which produces analyst reports about companies and industries, said Andy Kessler, a former analyst who has written several books about Wall Street.

“There’s a huge amount of grunt work that has been done by $250,000-a-year Wharton M.B.A.’s,” Mr. Kessler said. “Some of that stuff, it’s natural to outsource it.” (we don't need no stinkin $250K jobs here!)

After research, the next wave may include more sophisticated jobs like the creation of derivative products, quantitative trading models and even sales jobs from the trading floors.

Proponents of the change say Wall Street’s wary embrace of the activity may signal the beginning of a profound shift in the way investment banks are structured, with everyone but the top deal makers, client representatives and the bank management permanently relocated to cheaper locales like India, the Philippines and Eastern Europe.

In the future, executives in India like to joke, the only function for highly paid bankers in New York or London will be to greet clients and shake hands when the deals close. (I don't think it's that funny or facetious myself - give it 20 years)

Permanently moving banking jobs out of New York or London is a touchy subject on Wall Street. Many investment banks, including Morgan Stanley, Goldman Sachs, Merrill Lynch and Citigroup, would not make executives available to discuss the topic. Press officers for most banks asked not to be quoted or argued over semantics. For example, one spokesman said his bank’s fast-growing India support operations are not an outsourcing facility, but a “center of excellence”; another argued that large cost cuts at his bank’s New York and London headquarters were really “re-engineering” so the bank should not be included in such an article. ( I love it! It's all about semantics baby - Hello Mr. Jones - we are shipping your job to Mr. Shah at the Center of Excellence - please back up your stuff in the box provided. Good day sir!)

Again this is not to criticize or really admonish such moves. Just to point out the reality versus what you are "told" by political and business leaders. The reality is a very stark difference and it is done slowly but surely - erosion.

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