The New Economist points out a piece of Deustche Bank research on Indian outsourcing, which is ironic given equity research is being outsourced to India:

In one of Colombo's few skyscrapers, a battery of analysts is crunching numbers and writing equity research reports. But they won't put their name on them. Ghostwriters of international finance, the young analysts at Amba Research work in complete anonymity for the world's biggest investment banks and for a third or less of the cost of a junior analyst in New York, London or Hong Kong..."At a cost of one third to half of an onshore analyst, our clients get 75 to 80 percent of the functionality," said Amba co-founder Brad West at the firm's marketing office in Singapore.

Amba hires young accountants or MBAs in Sri Lanka and India, puts them through a five-week equity analysis course and then subcontracts its staff on a one-year basis to clients. Firms like Amba pay their analysts US$10,000 (HK$78,000) to US$25,000 per year and charge their clients upwards of US$50,000 per year. That compares with a total cost of US$150,000 to US$250,000 for a junior analyst on Wall Street or in the City of London, West said.

The head of research at a European bank that makes extensive use of firms like Amba said that outsourced analysts typically don't work on deal research, communicate with clients or corporates, or publish under their own name...But the banks are not eager to admit they outsource research, as they worry about perceptions of research quality. "They would rather admit to income tax evasion than to outsourcing," West quipped. The secrecy works both ways. Amba clients have code names, and "to talk about who your client is a firing offence," he said...

Industry players say that equities research outsourcing is part of a third wave of outsourcing known as "knowledge process outsourcing," which focuses on highly skilled jobs such as investment research, medical diagnosis and legal work. Analysts estimate there are only about 1,000 to 1,500 people working in equities research in India and Sri Lanka; half of them for so-called "captive" units of global investment firms...Industry players say that the growth of research outsourcing in South Asia has not yet led to job losses in Europe or the United States.

"Outsourcing has allowed research firms to be more thorough and to cover more companies," said Joseph Sigelman, co-chief executive of Chennai- based OfficeTiger.

Asks West: "The interesting question is what the banks will do during the next sharp downturn in global equity markets: will they cut back on in-house research or outsourced research?"

The future is here, and it's being outsourced.