[lit-ideas] Re: The Digital Death Rattle of the American Middle Class
- From: "Andreas Ramos" <andreas@xxxxxxxxxxx>
- To: <lit-ideas@xxxxxxxxxxxxx>
- Date: Tue, 6 Jul 2004 21:09:35 -0700
> The Digital Death Rattle of the American Middle Class
This isn't theory anymore. There is a massive job exodus going on. The current
New Yorker
has a long article on offshoring. 20% of Wall Street analyst jobs have already
moved. The
article below describes the rapid acceleration of this process.
yrs,
andreas
www.andreas.com
400% Jump in Offshoring, especially to India
Amy Wu, Chronicle Staff Writer,
Tuesday, July 6, 2004 (SF Chronicle)
Global financial institutions are jumping on the offshoring bandwagon at a
blistering pace,
a study released last week found. From 2003 to 2004, financial institutions
from North
America and Europe increased offshore jobs from an average of 300 to 1,500
each, a stunning
400 percent jump, according to the survey by Deloitte Research, a unit of the
accounting and
consulting firm Deloitte & Touche.
During the same period, the number of financial institutions that moved
functions to other
countries with cheaper labor rose 38 percent, Deloitte found. "The growth is
spectacular,
there is no question it's there," said Peter Lowes, the New York head of
Deloitte
Consulting's outsourcing advisory practice, who helped spearhead the project.
"It's very
real. This has been building up very slowly over 15 years. This is not a flash
in the pan,"
he added.
In its second annual study of financial services offshoring, Deloitte surveyed
43
institutions, including banks, mutual funds and insurance companies, in seven
countries
between December 2003 and March 2004. The survey included 13 of the world's 25
largest
financial institutions, ranked by stock market value, Deloitte said. It
declined to identify
survey participants.
The larger the company, the more likely it was to operate offshore, Deloitte
found. Based on
the survey, Deloitte estimated that some 80 percent of the world's largest
financial
institutions -- those with stock market capitalizations greater than $10
billion -- already
have offshore operations. Among smaller financial companies, about half operate
offshore
while the other half don't do so yet. "The gap is growing. The big ones are
changing ahead
and the small ones don't have scale," Deloitte's researchers said.
India has emerged as the location of choice for financial institutions,
Deloitte found.
About 80 percent of financial services offshoring is taking place there,
according to the
study. Lowes attributed last year's rapid growth in offshoring to the
maturation of
telecommunications technology, which has eased transmission of digital data.
That has
allowed data-intensive functions as varied as customer service and software
development to
move overseas. In addition, Lowes said, emerging countries are wooing big
companies with
perks such as tax-free incentives. Another reason for the leap is that
companies that
started offshoring more than a decade ago on a small scale are now building out
larger
operations. "The pioneers had been out there for 10 or 11 years, had taken all
of the
risks, and they were building and building, and all of a sudden things fell
into place,"
Lowes said.
Although the report cautions that investing in offshoring isn't cheap and that
the rewards
might not be immediate, it notes that companies stand to achieve big savings.
The report
forecasts that by 2010, the world's 100 largest financial institutions will
move $400
billion of their cost base offshore, saving an average of just under $1.5
billion annually
each. The survey also forecasts that by 2010 more than 20 percent of the
financial
industry's global cost base will have gone offshore.
By the numbers
Financial institutions are moving jobs offshore at a rapid pace.
-- From 2003 to 2004, major financial institutions increased offshore jobs
by 400
percent.
-- The number of financial institutions moving operations to countries with
cheaper labor
rose 38 percent during the same period.
-- By 2010, the world's 100 largest financial institutions will have moved
about $400
billion of their cost base offshore.
Source: Deloitte Research
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