Posted on 12/06/2003 9:18:05 PM PST by Destro
IBM bets on outsourcing
Companies are going to continue outsourcing, or handing their non-core business activities to other companies such as IBM to manage, says Doug Elix, IBM’s head of services.
Reuters
Friday, December 05, 2003
NEW YORK: International Business Machines Corp. will continue to build its services business abroad, an official said on Thursday, saying it makes IBM more competitive, saves its customers money and frees up funds for other purposes.
"You can expect continued growth in this marketplace," Doug Elix, the head of IBM's services division, told analysts.
Companies are going to continue outsourcing, or handing their non-core business activities to other companies such as IBM to manage, he said.
IBM, based in Armonk, New York, has been among companies that have moved traditionally higher paid services jobs to low cost centers such as India in recent years.
"I do believe this is one of the more misunderstood elements of what's going on in our industry," Elix said. "We have been leveraging skills globally for as long as we've been in business."
Elix was speaking at IBM bi-annual meeting with analysts.
Reuters
When IBM uses the term "outsourcing", it (or he, Doug Elix) is referring to service contracts where IBM;s customers transfer the management of all or part of their IT functions from in-house to 3rd-party (IBM).
This is entirely, as a categorical matter, distinguishable from "off-shoring", which means transferring services provided in the US to services provided (at least in part, typically with US management) from India or other non-US countries.
The author of this piece is using Elix's words to create a false impression that when IBM says "outsourcing" that it means "moving US jobs to India".
That is absolutely false -- that's not what Elix is saying here.
or is it, "I've Been Moved?"
Yep
"I do believe this is one of the more misunderstood elements of what's going on in our industry," Elix said.
I think people understand very well what's going on, Mr. Elix
Here's a hint for you. "Leveraging skills globally" is corporate-speak for offshoring
Here's what he said:
"I do believe this is one of the more misunderstood elements of what's going on in our industry," Elix said. "We have been leveraging skills globally for as long as we've been in business."
What he's saying is that outsourcing to a global company has traditionally meant that the outsourcer uses its global capacities, ie, a help desk may be provided from Canada, consultants from the UK may be part of a design team, etc.
Meaning companies like EDS, IBM, CSC, etc, have always had a global reach, which they make avaialable as part of the skills in their new technical solution. Customers of EDS, IBM, CSC want BETTER services than the customer can provide internally, AND they also want the services at a lower price. The outsourcer tries to accomodate both demands, and uses its global resources to design that solution.
That's distinguishable from pure India-based companies who are directly bidding on 'offshoring' application development work or help desk work. THEY are the new breed in the marketplace.
I got the same mixed signals from the article. I certainly know the difference between outsourcing and offshoring, and was wondering where the article was going to tie the two together. It didn't. So after reading this, I have no idea if IBM's statements have anything to do with their offshoring plans.
Two other major kinds of outsourcing IBM does are taking over IT operations for their clients, and sending similar business to consulting companies who are IBM business partners. Offshoring may or may not be part of that mix.
It would be big news if IBM abandoned the onshore kind of outsourcing, but I don't see any indication of that here.
Trust me from one who knows -- IBM is certainly NOT abandoning onshore outsourcing. IBM is providing it today at the level of hundreds-of-billions, and is actively negotiating more of the same every day with new outsourcing customers. Global delivery of the services has always been part of the mix because many of the customers themselves are "in-house" global before IBM even comes into the picture, i.e., the customers already have a global IT infrastructure.
Some "offshoring" may be blended into the mix of a "new IT solution" for the customer, but in measured amounts, balancing $$ savings to the customer (which the customer is demanding, and may need to survive in their business) versus the risk management provided by maintaining ther (ususally most) IT functions "onshore", to use the phrase.
By the way, the customer base is being represented by consultants, i.e., Gartner, who come in and whisper "savings" and "offshore" to the customer IT managers, and in turn the customers demand more and more (with more risk) offshoring and more savings -- and companies like IBM find themselves in the role of trying to advise AGAINST the extreme risks, because in the end the Outsourcer will be asked to make-things-right-again after it 'breaks'.
So this is a VERY complicated process with multiple dynamics at stake.
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