Investment Banks Go Offshore for Analysis and Research Services

The offshoring trend has taken another surprising turn. Having successfully outsourced to India such back-office functions as IT, investment banks are now sending some of their financial analysis and research overseas. In recent months, firms including J.P. Morgan and Morgan Stanley have quietly hired Indian firms or set up their own subsidiaries in India to handle basic financial modeling and comparable analysis.

Two main factors are driving this trend. First, it's cheaper. According to Dushyant Shahrawat, a senior analyst with Needham, Mass.-based TowerGroup, a financial-services industry research firm, the fully loaded cost of hiring an experienced junior analyst in India is between $20,000 and $25,000, compared with between $85,000 and $90,000 in New York. Such savings are especially attractive now that banks are no longer subsidizing sell-side research with investment-banking fees.

Second, banks hope that by freeing senior analysts to concentrate on analysis rather than running numbers, they will produce better—and more—research. "The bank always has to have the equity analyst sitting in New York, being able to talk to CEOs," says Joseph Sigelman, co-CEO of OfficeTiger, one of the Indian firms serving Wall Street. "But if we can take away some of the very structured, re-petitive tasks, the number of companies the analyst can cover increases significantly."

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