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Tuesday, August 12, 2008

"First they outsourced IT, and I said nothing because I was not an IT worker...."
Posted by Jill | 6:52 AM
If your job in any way involves generating paper, network packets, and talk, you are at risk of having it outsourced overseas. Because outsourcing isn't just for IT anymore:

Wall Street’s losses are fast becoming India’s gain. After outsourcing much of their back-office work to India, banks are now exporting data-intensive jobs from higher up the food chain to cities that cost less than New York, London and Hong Kong, either at their own offices or to third parties.

Bank executives call this shift “knowledge process outsourcing,” “off-shoring” or “high-value outsourcing.” It is affecting just about everyone, including Goldman Sachs, Morgan Stanley, JPMorgan, Credit Suisse and Citibank — to name a few.

The jobs most affected so far are those with grueling hours, traditionally done by fresh-faced business school graduates — research associates and junior bankers on deal-making teams — paid in the low to mid six figures.

Cost-cutting in New York and London has already been brutal thus far this year, and there is more to come in the next few months. New York City financial firms expect to hand out some $18 billion less in pay and benefits this year than 2007, the largest one-year drop ever. Over all, United States banks will cut 200,000 employees by 2009, the banking consultancy Celent said in April.

The work these bankers were doing is not necessarily going away, though. Instead, jobs are popping up in places like India and Eastern Europe, often where healthier local markets exist.


And cheaper labor, which is the real motivation behind outsourcing. It shouldn't come as a surprise that the very same bankers who got us into this mess are looking to shore up their own jobs by jettisoning the grunts in the trenches -- even if those grunts were making six figures. As the hidden motivations of those behind the financial mess in this country become clear (most notably the systematic and deliberate elimination of the middle class), I have to wonder if jettisoning those six-figure junior level employees was part of the plan all along.

But if you really want to see the back of your own head explode, read this part of the same article:

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.


"Center of excellence." If the workers in India are so excellent, then why don't you want to pay them what you would pay workers here? For that matter, if they're so excellent, shouldn't you be paying them MORE?

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5 Comments:
Anonymous Anonymous said...
Jill, Jill, Jill,
Oh ye of such naive values....

"Center of excellence." If the workers in India are so excellent, then why don't you want to pay them what you would pay workers here? For that matter, if they're so excellent, shouldn't you be paying them MORE?

Companies don't pay salaries based on WORTH -- or "excellence". If you've ever had the [mis-] fortune to see a list of employee salaries you'll note that those that YOU think are the best and brightest are often not the highest paid. [I've always figured those that are really, really passionate about their jobs aren't in it for the money... But then, what do I know?]

I suspect the banking grunts making 6 figure incomes aren't in it because they really, really love the job. They really, really love the MONEY, and their bosses know it. I suspect most of them work for banks -- instead of say MicroSoft -- because, in the famous words of Willie Sutton, "That's where the money is"...
The banks would be very thrilled to pay them Indian wages in Jersey City, but we all know they wouldn't accept them.
Do I hear "H1B"?
8/12/08, 10:22 AM  
Blogger Eric Easterberg said...
It's interesting to see the difference in approach used in the financial and IT industries. In the financial world, this trend is swept under the rug, not commented on. Only if pressed do the spokesmen admit that they have "centers of excellence" overseas, but they are still careful not to cast aspersions on the people they still have working in this country.

The IT industry has taken a decidedly different approach. They have embraced their overseas brethren, pumping up the legendary education provided at such schools as the Indian Institute of Technology, while derogating the young people of their own country ("you're good enough to buy our products, but not good enough to make them").

Why the difference? I'm not sure, but I suspect it comes from a reluctance to paint an education from Wharton or Harvard or University of Chicago as worthless; perhaps the execs don't think that would be credible (or, worse yet, would cast doubt on their own competence, as they came from the same schools). There is no such compunction about relegating the graduates of our computer science programs to the status of dumb know-nothings.

Of course, it may just be a matter of timing. Maybe this is all new to the financial guys, and, in time, they will learn to say things like, "Our graduate schools of business just aren't capable of turning out graduates with the skills we need, our hands are tied, we have to move the jobs overseas to have even a faint hope of getting them done right."
8/12/08, 10:34 AM  
Blogger D. said...
Marx and Adam Smith covered this pretty well back in the day.

The mistake was letting the labor lessons of the late 19th-early 20th century be forgotten or assumed to be moot.

Much like the lessons of the Great Depression were forgotten or assumed to be moot by libertarians and Republicans.
8/12/08, 2:53 PM  
Blogger Citizen Carrie said...
I'm glad this is getting reported. I don't think this is a brand-new trend (Business Process Outsourcing has been around for a long time), but the fact that it's happening to the Young and Restless on Wall Street makes it newsworthy.

Without bringing in new blood every year, the banks will obviously be looking for future executives from a different source.

Like Androcass said, it will be interesting to see how the message spins from year to year.
8/12/08, 6:43 PM  
Blogger Eric Easterberg said...
Actually, I was not complete in my earlier comment. Another reason these companies want to pretend they aren't offshoring is that they already know a government bailout may be necessary.

Think the American public would be less likely to support those bailouts if they knew their money was going to save jobs in Bangalore?
8/12/08, 6:50 PM  
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