U.S. financial firms prefer India to relocate jobs: survey
Wednesday, 07 May 2003, 19:30 IST
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NEW DELHI: India has emerged as the preferred destination for relocation of more than 500,000 jobs over the next five years by U.S. financial services firms, said a survey report Tuesday. The transfer of over 500,000 jobs represents eight percent of the U.S. financial sector's total workforce and will result in annual savings of $30 billion, said the survey conducted by global management consultancy major A.T. Kearney. The A.T. Kearney survey ranks India as the best country overall for offshore business processing, followed by Canada, Brazil, Mexico, the Philippines, Hungary, Ireland, Czech Republic, Australia, Russia and China. "The relocations will involve a wide range of high-end functions, including financial analysis, research, regulatory reporting, accounting, human resources and graphic design," said the survey. Until recently, U.S. offshore job transfers have primarily focused on back office functions such as data entry, transaction processing and account reconciliation. "The relocations are expected to reduce annual operating costs (of U.S. banks, brokerage firms, insurance companies, mutual funds and other financial services firms) by more than $30 billion," said A.T. Kearney. India, which has carved a niche for itself in the global technology outsourcing market because of its abundant, high quality and cost effective pool of skilled workers, is also fast emerging as the global hub for financial outsourcing jobs. J.P. Morgan Chase & Co. said last month it would hire 40 junior stock analysts and other research staffers for its Mumbai office this year as a way to expand research in a weak market. Investment banks like Morgan Stanley, Goldman Sachs Group and Citigroup Inc. are reportedly planning to ship research jobs to countries like India, where salaries for graduates are low compared to those in the U.S. and Britain. "Any function that does not require face-to-face contact is now perceived as a candidate for offshore relocation," said Andrea Bierce, an A.T. Kearney managing director who oversaw the study. "The debate at major financial services companies today is no longer whether to relocate some business functions, but rather which ones and where." Although current international tensions have raised concerns about moving jobs overseas, Bierce said geopolitical issues so far have not adversely affected the trend to relocate jobs overseas. The survey said one major U.S. financial services company last year decided to move several job functions to India at the height of tensions between New Delhi and Islamabad. "Most major U.S. financial services companies are increasingly trying to establish a global footprint by maintaining operations in multiple overseas locations," Bierce said. "This limits their exposure to any one country and gives them secure disaster recovery capabilities for the various regions they serve." A.T. Kearney said determining the "optimum offshore location" requires assessing a myriad of critical factors, ranging from labour costs to political stability. The survey said although India would likely maintain its lead for several years as U.S. financial firms' preferred outsourcing destination, China was expected to become an increasingly popular location. "We already know that one major insurance company is developing an innovative product to protect intellectual property (in China)," Bierce said. "As these types of products proliferate, we believe China will make great strides in attracting U.S. financial services companies." The report said while the vast majority of financial institutions surveyed see reduced costs as their primary reason for off-shoring jobs, improved productivity and enhanced service quality are secondary drivers. Bierce, however, cautioned that while the trend toward off-shoring jobs has accelerated in recent years, the survey indicates that the effectiveness of these moves is far from certain. "It's clear that some financial services companies have experienced formidable challenges deriving all the benefits they hoped to achieve from their offshore initiatives," the official said. "Although 50 percent cost reduction can be achieved in many instances, companies need to manage the process transition effectively and establish metrics in the beginning so they can measure the overall effectiveness."
Source: IANS
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