Intel, the world's largest chipmaker, and JP Morgan Chase, the global investment banker, said on Monday that they would outsource significant operations to India, an indication that more complex, high-value work is moving here.
Intel, based in Santa Clara, California, will invest more than US$1 billion in India over the next five years, of which US$800 million will go to expanding its research and development center in Bangalore, the company's chairman, Craig Barrett, said in a statement during a visit to New Delhi.
Intel's news followed the announcement in October that Cisco Systems would invest US$1.1 billion and triple its staff in India, from 1,400 to more than 4,000, in three years.
Intel's Bangalore center employs around 3,000 engineers who design and develop products. Barrett said on Monday that its latest investment "demonstrates Intel's long-term commitment."
Intel will invest the remaining approximately US$250 million as venture capital in technology companies.
JP Morgan Chase said it would add 4,500 employees in India by 2007, mainly by setting up operations in Bangalore to support its growing structured finance and derivatives businesses globally. The company will hire a mix of recent graduates and experienced workers and will double the size of its India operations. All 4,500 of JP Morgan Chase's current employees in India are based in Mumbai.
The bank made news two years ago when it became the first global investment bank to hire 35 equity researchers in India to support its operations on Wall Street.
"In our experience, we have found high-quality, low-cost staff in India and we want to continue investing in the country," said Michael Golden, a spokesman for the bank who is based in London."The investment is about meeting the growing needs of our business and not about shipping jobs from another location."
Wall Street firms and large global banks have been particularly aggressive in outsourcing work to India in recent months. UBS said it would open its first center in Hyderabad with 500 jobs early next year. Goldman Sachs has 750 people in its center in Bangalore but has a capacity for 1,500 employees.
"This is way beyond mere cost savings," Madhavi Mantha, a senior banking analyst at the financial consultancy Celent, said from Montreal. "Unless global banks are comfortable with the quality of work, they would not risk taking the work offshore."
JP Morgan Chase said the new employees will process complex derivatives settlements and structured finance transactions. The company will hire about 400 people a month. By 2007, it will have almost a third of its back-office and support jobs, about 3,000, in India.
Offshoring of work to India has steadily risen in the last few years, despite political discomfort in the US over the trend. Recently, high-end jobs in areas like chip design and complex product design have been added to the relatively low-end call center and paid-by-the-hour software coding work.
Though salaries in India are climbing rapidly for entry-level workers and top managers, Indian employees still earn less than a fifth of what their peers in the US do.