The collapse of Wall Street may prompt financial services firms to increase their use of offshore outsourcing and cut more jobs in the US on top of the layoffs they have already announced.

And that job cutting will happen even with a taxpayer-backed US$700 billion bailout. These firms will be under too much pressure to cut costs, and offshore outsourcing will be one way to do it, according to outsourcing consultants.

The financial services industry, including banking and insurance, is already the most aggressive industry in the US when it comes to offshore outsourcing. It is the biggest single source of revenue for Indian offshore companies.

For instance, Infosys Technologies, which finished its most recent fiscal year in March with US$4.18 billion in revenue, reported that nearly 36 percent of that revenue came from banking, financial services and insurance. For the same period, Wipro, reported that financial services contributed 25 percent to its annual revenue of nearly US$5 billion. Satyam Computer Services reported US$2.13 billion in revenue for that same period and recently told investors that financial services would contribute 24 percent to 26 percent in revenue in this fiscal year.

In the short run, Peter Bendor-Samuel, founder and CEO of Everest Group, a consulting firm, said the need by financial services firms to cut costs "will probably result in an acceleration of financial services jobs going offshore."

Bendor-Samuel said more regulation and oversight may create some headwinds to offshore outsourcing, but the factors he believes will have greatest impact on offshoring work will be the appreciation of the rupee and rising wages in India.

If Congress decides to link the Wall Street bailout to offshore outsourcing, and there are no signs that it will, the flashpoint may be the H-1B visa, which is heavily used Indian offshore outsourcing companies.

Indeed, the three companies cited earlier were also the three largest users of the H-1B visa in 2007, according to the US Bureau of Citizenship and Immigration Services, which issues the temporary work visa. Infosys received approval for 4,559 H-1B visas last year, Wipro, 2,567, and Satyam, 1,396.

The H-1B visa has some tough critics in Congress but, including U. Senator Chuck Grassley, who said last year that the visa "is so popular that it's now replacing the US labor force." The US is issuing 85,000 of these visas annually.

Congress has generally supported the H-1B visa and that includes Senators John McCain and Barack Obama. Microsoft co-founder Bill Gates has been very vocal on the issue. Whether increasing unemployment and the Wall Street bailout changes this support is a question.