Nicole Maestri and Dinesh Nair
NEW YORK/BANGALORE: Rishi Khosla remembers a phone call he made to a US investment bank a few years ago when he was trying to drum up business for his Indian financial research firm.
The call ended quickly after the US executive said he did not need the call center services he wrongly assumed Khosla was offering.
But these days, the banks are calling Khosla, whose firm, Copal Partners, does the work many young investment bankers do in their first job out of business school -- industry analysis, valuation models, and putting together pitch books to woo client business.
With about 100 employees in India, Copal does the work for a fraction of the price it would cost in a bank's home office.
"We're really touching the core of what Wall Street bankers actually do on a day-to-day basis," said Khosla, a former banker, who lists several investment banks as clients.
He said work produced by his firm, where his top-tier employees are paid $60,000 to $70,000 a year, was indistinguishable from that done in New York or London.
Significant cost savings initially attracted Wall Street and other U.S. financial service companies to India, where high-skilled but lower paid workers and cheaper overheads can cut expenses by at least a third, according to various estimates.
Citigroup, Goldman Sachs and J.P. Morgan Chase are among financial giants employing workers in India. Bank of New York Co. has moved hundreds of jobs to cheaper locations like India in recent years, saying it can save up to 45 percent per position.
Deloitte Research estimates 80 percent of financial institutions worldwide with market capitalization of $10 billion or more have offshore operations, with India the favored location.
Deloitte estimates by 2010 about 20 percent of the global financial services cost base, or $414 billion, will be shifted offshore, saving the typical large financial institution almost $1.5 billion a year, with an average cost reduction of 37 percent for each relocated process.
Ramesh Kumar, chief executive of SG Software Asia Private Ltd, acknowledged cost was a significant factor, with one employee's pay in Europe equal to three in India, where telecommunications and travel also are cheaper.
"If we add up it all up, the savings are anywhere between 30 to 35 percent," he said. But he stressed that the quality of work was paramount.
"In this kind of boom we ourselves can be a killer by not being able to deliver a quality product."
Co-Chief Executive Joseph Sigelman of Office Tiger, said 60 percent of revenue comes from Wall Street firms, with his client list including eight of the largest 12 investment banks, leading global law firms, and major accountancy firms.
He, too, stressed the need for quality over cost.
"If the only driver over time remains cost, then this is not a sustainable business unless
we actually perform the services better than they can be anywhere else," he said.
(Additional reporting by Jonathan Stempel in New York and Narasimham Vemuganti and Narayanan Somasundaram in Bangalore)