To be successful in the long term, IT outsourcing firms in India must encourage their employees to care about financial services.

There has long been a challenge in India of getting IT graduates / engineers to care about banking. Traditionally they spend a few years working on Oracle implementations, then they move on to Java. They don't care what the end result is and they don't understand what the end users do with the system once it is completed. What is an interest rate swap? 'Who cares?' they say.

This was fine when firms were just looking to outsource coding and testing of back-office systems to low-cost centers such as India, because requirements we're simpler and project lead times were fairly long, but times have definitely changed. More and more financial services firms are outsourcing development and testing of front and middle-office systems-- which require immediate action and delivery yesterday if possible.

As outsourcers move into the front office--some are now even talking about developing quantitative models for their clients--IT workers are expected to understand the business side of things much more than before.

If a trader has to spend half an hour explaining to his or her IT developer what NPV means, you can bet that relationship won't last very long, says Kedarnath Udiyavar, global head of investment banking products and services at Chennai-based Polaris Software Lab.

Udiyavar also believes that employees who understand the business drivers for the work they do have greater job satisfaction and are more likely to stay with their employers longer.