The threat of outsourcing of high
paid jobs overseas will add to the challenge to European economies where
outsourcing to date has mainly affected low-skill call centre and back
office administration positions.
Indian companies are preparing to offer more
profitable, highly skilled, analytical work, including actuarial services and
financial modelling. They are interested in tapping into the £80 billion (€115
billion; $150 billion ) market for research and analysis.
According to the London-based
financial services consultancy Troika, a total of 100,000 jobs will be lost to
low-cost countries by the end of the decade.
Andrew Stewart, managing director
of Troika, said: "There is a growing shift to look at offshoring more complex
and high-paid roles - finance, research, human resources, marketing, actuarial
and underwriting."
Indian companies are already
providing research services to London-based stockbrokers and management
consultancies, feeding into work completed by equity research and economic
research teams, and giving background industry analysis for
consultants.
ICICI OneSource, the outsourcing
division of one of India’s largest financial services groups, last year
signalled its interest in building a presence in the lucrative research
outsourcing market with the purchase of a majority stake in Pipal Research, a
US-based research company that operates in India.
However, the outsourcers deny they
are taking jobs at the top end of the market. They argue that outsourcing
releases UK-based workers to generate more money by spending more time with
clients.
The Corporation of London has also
rejected claims that moves to take jobs offshore poses a threat to the
City.
International Financial Services,
London (IFSL) said this month that the market for financial services work
carried out offshore would be worth some £77 billion ($111 billion; $144 billion) in 2005, representing a £38 billion (€55
billion; $71 billion) saving on the cost
of those services in the UK. Up to 10 percent of the global
financial services cost base is projected by Deloitte to be shifted offshore by
end-2005.
In its new
IFSL report Offshoring of Services: Impact and Implications, India, not
surprisingly, emerges as the biggest global destination for export-oriented FDI
projects: 228 out of over 1800 reviewed in an UNCTAD study. Projects of this
type contributed to an eightfold increase in India's exports of business
services between 1996 and 2003 to reached $17bn.
More surprising,
perhaps, are other findings in the report, for example:
- The UK is the
largest recipient of export-oriented FDI projects in Europe, 187 in total in
2002 and 2003, second only to India globally. The UK also has the largest trade
surplus globally in business and computer services, $25bn in 2003, underpinned
by London's long standing status as a leading global centre for advisory and
professional services.
- Offshoring generates
a net global gain of $0.47 for each $1 invested offshore. Economic growth
is boosted not only in the country in which the service is offshored, but also
in the home country from which the service has been outsourced. The benefits to
the home country are more likely to accrue where labour markets are flexible and
where resources are invested in education and training to reskill people
displaced by the offshoring decision. One US source estimates that growth in the
US between 1995 and 2002 would have been 0.3% a year lower without foreign
offshoring.
- The contribution to
business competitiveness of lower costs is widely recognised, but firms also
have other motives for offshoring related to procurement objectives, location
quality and the opportunity to develop new markets.
In India, the equivalent salary for
a $100,000 (€71,100; £53,700) Wall Street analyst would be about
$30,100 (€23,236; £16,100).
Download the IFSL report (in
pdf format).
