Anyone see this article in the NY Times?

Looks like banking might not be the glorified place once was...but anyway, I don't really know what to say. I'm only a junior so if someone else would like to perhaps comment?

..have u read outsource me on LSO?

but from my experience in banking (not equity research), most of the outsourced work has been things like pitchbook edits, data-mining for research and news articles, and at times comps.

in my group, even though we had the option to outsource our comps, we were told not to.

but a good amount of the analyst's work is just this editing, research and comps. I wonder if the guys in india will be busting out lbo models..o wait, they have templates where they can just plug numbers in..

o wait..they have capiq and thomson financial which can just pull in data using a formula.

but who's going to be the future of banking..or private equity since PE shops usually get their associates out of banking programs..

Very interesting article, but I think it's a little overhyped. For example:

"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."

I doubt it. Doomsayers were predicting the same thing for the IT industry in the United States. Sure, some of the grunt work has been outsourced, but the job market for software engineers in this country is as healthy as it's ever been.

Lets not forget that you will still need junior bankers to be trained into the roles as Deal makers and client relationships. These individuals will still need to be connected to and understand their presentations.... for what they dont get involved in (modeling or comps) the junior analyst will need to make him privy to. This means that it would be highly problematic to outsource the analyst classes at banks.

I think we often overestimate the work and ability of low cost outsourcing. I really can't see an office in india providing the same work, quality, and availability that is expected for junior bankers. Alot of engineers constantly regret their companies decision to outsource to india because it involves a lot of telephoning back and forth as well as work thats done incorrectly.

The only thing that changed for us, is that the people who used to pull our news runs, equity & fixed income research reports, bond indentures, and other things that someone making 50k in NY or San Fran used to do. There are some people out there doing comps, but no one uses them (they're usually wrong, and it's tough explaining to a MD or a client that it was India's fault).

Three reasons why outsourcing hasn't worked out so far:

1. It's a client facing job. Junior bankers constantly are on the phone or face-to-face with companies and financial sponsors. Also if companies are going to pay 3 to 5 points on a deal, they would rather have the nation's best and brightest working on the deal rather than some kid who can't speak english out in Mumbai.

2. As much BS as it sounds, banking is team-oriented job. It's a pain in the a$$ as it is working with someone in San Fran or Chicago from NY. Imagine being on complete opposite time zones and having the MD/VP barely understand a word the analyst/assoc is saying. When a MD wants his comments turned during his lunch, he's not going to want to fax his comments and walk through his changes with an analyst at midnight India time.

3. Relative to their contribution (yes I know it's lofty to assume this), analysts / associates are pretty low-cost.

Investment banking is a "local" game where the senior investment bankers need to keep in constant contact with clients. In turn those senior bankers like to have trusted analysts and associates close at their side to run models, conduct analysis, turn pitchbooks, and sometimes attend meetings. I know from first hand experience that you can trust someone thousands of miles away to put together a stock chart but in cases where time sensitivity and most importantly accountability are of a critical nature, senior bankers would rather have someone in the next cubicle over. Investment banks realize they need to train their next crop of senior professionals and would never totally eradicate the junior class. The outsourcing is a cyclical decision that will come back in-house once the M&A market has a trending upturn.

These crap articles are rehashed every few years... think there was even a thread on WSO about a very similar article last year...

http://www.guardian.co.uk/business/2006/nov/06/india.internationalnews

seems like some crappily underpaid journalists are just a wee bit bitter...

It seems to me that mistakes can happen, but as many people mentioned, the accountability factor in IB is probably second to none. I remember talking to a partner at a PE firm about a business broker that was complaining about the comp structure they were receiving for referring a deal that closed. Although it was an additional $100k or so, the partner said it wasn't worth losing the contact to argue over something that might be rather minute in the future.

I think once IBs actually weigh the cost-benefit of outsourcing some of these very critical pieces, they will realize the amount of money they save with the unknown person in India isn't worth the client that might walk away from the table if the things are terribly messed-up.

The only time I've ever seen guys like this be utilized is when I need the historical price of some obscure commodity, or if i want research on the argentinean housing market. I'm not worried about getting replaced. Just worried about getting straight up fired.

The work that comes from India is TERRIBLE! Absolutely terrible. Their comps always have errors and same thing with profiles. I could not trust anything that came from India, and neither would the MD's and D's .

In addition, the team structure is vital to banking. MD's need answer fast and cannot wait until 10 PM so the kid in India wakes up and goes to work.

Finally, let's say Wall St was stupid enough to outsource everything on the junior levels and keep "only the deal makers". Fast forward 10 years. Where would the next generation of deal makers come from? Imported from India? Come on....