Wall Street firms spent $417 million on contracts to outsource information technology and business operations offshore last year, and the number will jump to $1.31 billion by 2005, according to a report released Wednesday by the TowerGroup, a research company focused on the financial services industry. The report said Indian companies have become the pre-eminent providers of offshore outsourcing to the U.S. securities industry, thanks to low labor costs, sophisticated processes to manage offshore projects and highly certified staff. The trend bodes poorly for techies on Wall Street. The TowerGroup said 8,150 U.S. Wall Street IT jobs will head offshore between 2002 and 2005.
Consistent performance by overseas providers will be crucial to preserving Wall Street's trust, said TowerGroup analyst Dushyant Shahrawat. "The single biggest factor that could derail the offshore train would be if news got around of the failure of a major offshore deal," Shahrawat said.