In the past 18 months, at least five global investment banks have ramped up teams of research analysts who study companies and write reports on their stock for investors.

Yes, equity research outsourcing is here. “Equity research will clearly be a major part of the next big outsourcing wave. We are likely at the cusp of the greatest period of innovation and experimentation we will ever see in equity analysis, a wholesale reexamination of the research we produce, how we produce it, and who pays for it. Right now the Street is losing US $4 billion a year producing equity research,’’ pointed out David Weil, chairman and CEO of US-based The National Research Exchange, an electronic marketplace for equities in a December 2004 interview.

Weil believes that stock research margins are shrinking in developed countries. In the nineties, spreads were at twenty-five cents per share and retail commissions ran in excess of two hundred dollars on a round lot (100 share order). Following the dotcom bust, decimalisation has compressed spreads by as much as 95 percent, and the Internet has driven retail commissions to fewer than $10 per trade in many instances.

To save on costs and to increase their value proposition to clients, Wall Street firms are discovering the value proposition of operating in low cost countries. By end 2005, Deloitte & Touche expects the top 100 global financial-services firms to offshore more than US $200 billion of their operating costs and save more than US $700 million.

India is emerging at the forefront of this fledging offshoring movement.

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