IBM to Export Highly Paid Jobs to India, China

Yahoo News ^ | Dec 15, 2003 | William M. Bulkeley and Peter Fritsch

[neverdem]

Mon Dec 15,12:14 AM ET

In one of the largest moves to "offshore" highly paid U.S. software jobs, International Business Machines Corp. (NYSE:IBM - News) has told its managers to plan on moving the work of as many as 4,730 programmers to India, China and elsewhere, Monday's Wall Street Journal reported.

delayed 20 mins - disclaimer Quote Data provided by Reuters

The unannounced plan, outlined in company documents viewed by The Wall Street Journal, would replace thousands of workers at IBM facilities in Southbury, Conn., Poughkeepsie, N.Y., Raleigh, N.C., Dallas, Boulder, Colo., and elsewhere in the U.S.Already, the managers have been told, IBM has hired 500 engineers in India to take on some of the work that will be moved.

IBM calls its plan, first presented internally to some midlevel managers in October, "Global Sourcing." It involves people in its Application Management Services group, a part of IBM's giant global-services operations, which comprise more than half IBM's 315,000 employees.

IBM's plan, still under development, will take place over a number of months in stages. About 947 people are scheduled to be notified during the first half of the coming year that their work will be handled overseas in the future. It isn't yet clear how many of the other 3,700 jobs identified as "potential to move offshore" in the IBM documents will move next year or some time later.

However, the fate of some of the targeted jobs isn't certain: IBM managers still haven't figured out whether all of the work the jobs represent can be performed just as well abroad. The jobs involve updating and improving software for IBM's own business operations.

Some workers are scheduled to be informed of the plan for their jobs by the end of January. After that they will be expected to train an overseas replacement worker in the U.S. for several weeks. The IBM workers marked for replacement have 60 days to find another job inside the company, likely to be a difficult task at a time when IBM is holding down hiring.

IBM declined to comment on what it called "internal presentations."

Wall Street Journal Staff Reporters William M. Bulkeley and Peter Fritsch contributed to this article.

[The Old Hoosier]

Programmers, of all people, are the easiest to export and the most expendable. Programs can be shipped and transported at no cost, much more easily than any manufactured product. But programmers are also the most versatile--they can do and create almost anything to make themselves employable or to start their own businesses.

As for the alleged inexaustible supply of cheap labor, Chinese salaries have improved to the point where some companies are moving on to the next labor market in search of something still cheaper. India is a truly "developing" country as well, and their labor helps make your life affordable, and helps U.S. small businesses thrive and survive and expand.

Somehow, despite the outsourcing that has gone on for years and years, we're more prosperous than we've ever been. There is an explanation for this.

[RockyMtnMan]

I consider Communist/Socialist nations turd-world as would most on this board. We had a policy during the cold war to not allow the soviets access to our high-tech innovations. Yet we seem quite comfortable sharing with the ChiComs, I don't get it.

This trend is not being driven by long-term goals but by short-term profits. The Chinese are long term thinkers and damn good at it and will capitilize on our short-sightedness. We should take a careful look at the long-term ramifications of a significant brain-drain of American resources and the ensuing disinterest of our youth in a science based career.

If the tides do turn then our best and brightest will be recruited to other nations just as we do to the rest of the world now.

[The Old Hoosier]

You're right about Craftsman--there's no substitute for quality. I prefer American Amish-made furniture to Chinese knock-offs. But I prefer Irish whiskey to anything made in Tennessee or Kentucky.

When the two products are identical--like a computing task of some kind that requires some middling skill--IBM would rather pay less than more. And they have every reason to keep their wholesale prices close to their competitors', and to undercut them whenever possible. Foreign labor will help them to do that.

Actually, every business in the country has been able to keep prices down thanks to cheap foreign labor in various menial tasks. Any business you pick, they are using tools or parts or implements of some kind that are cheaper to manufacture because some cheap foreign labor entered the equation somewhere along the line.

You benefit from this constantly. It's the only reason you can even afford an automobile, a computer, or a stereo. If we had closed off our market years ago, your life would be a lot different right now. You probably would not be here on FR.

[oceanview]

you and I know that, the other tens of millions of americans don't, and I don't expect Katie Couric to mention it.

[oceanview]

fine, I accept they they are intelligent enough.

Let some Indian entrepreneur start BBM, Bombay Business Machines. Let them hire low cost Indian staff, and undercut IBM prices for services. Then let's see BBM sign up Citibank, and Goldman Sachs as customers? Think they can? We all know the answer, they can't. So instead IBM uses their good name and sells out US jobs, they don't cut prices, and the execs pocket a good portion of the savings for themselves.

The end result: the wealthy executive class accumulates more, and the jobs of middle class people go offshore, and many of those americans are forced into lower paying jobs in the service sector. Our tax base shrinks, we have more people who need government assistance to have a middle class life, so the rest of us who still have jobs pay ever higher taxes to support those social services.

[Jim Cane]

? Boycotting our way to economic growth is a bit like taxing ourselves to economic growth

Not by any stretch of the imagination.
The former is pure free market decisionmaking. That sovereign individuals can band together and choose whether to purchase or avoid purchasing a particular brand or product is marketing at it's best.
The latter, taxing our way to prosperity has a more exact sibling - Spending our way to prosperity! Which is exactly what the U.S. is doing on a scale larger than the criminal Clinton administration.

- both are Democrat tactics that are sure to produce the opposite.

Onerous taxation and out of control deficit spending, yes.

Brand name boycotting is an age old free market tradition. Do you believe that only industry can practice laissez faire, but not the consumer?

Such a belief is indicative of mercantilist fascism.

[fourhorsemen]

More and more companies I speak with that have done this are finding that the benefits are overstated, and may in fact not even exist. They're finding shoddy programming, poor customer service, and escalating management costs. I'd bet that we'll see this trend decline in coming years.

[oceanview]

who is more prosperous? in a macro sense, sure. but peel back the onion and I believe you'll find that we are becoming a two tiered socio-economic society. What we used to think of as the broad "middle class" is increasingly occupied by those with government jobs.

[fourhorsemen]

More and more companies I speak with that have done this are finding that the benefits are overstated, and may in fact not even exist. They're finding shoddy programming, poor customer service, and escalating management costs. I'd bet that we'll see this trend decline in coming years.

[The Old Hoosier]

I consider Communist/Socialist nations turd-world as would most on this board.

I think most on this board consider them "Second World," since that's what they are.

This trend is not being driven by long-term goals but by short-term profits.

Short-term profits are the reason you have work.

I agree that the Chinese are evil and crafty, and I would support repeal of their favored trade status for that reason--but not to "protect" American jobs, which is an economic fantasy anyway.

We should take a careful look at the long-term ramifications of a significant brain-drain of American resources...

Americans leaving to take work in India? I don't anticipate that too soon--although yes, it could happen some day. We are the most economically sophisticated country on the planet, though, and I anticipate that our industries, absent government interference or "help" in maintaining unsustainable economic positions (eg tariffs, subsidies and other artificial means of inhibiting development) will adapt to the changing circumstances, as they always have.

...and the ensuing disinterest of our youth in a science based career.

On the contrary, even the dumbest in this country are becoming educated in computers and in science like never before in history. EVERYONE gets an education nowadays, which is really a first in history. You can go to a community college and learn enough about programming--just to name an example--to start your own business.

It's true that our public education system is generally a failure--I'd concede that it's our real achilles heel right now--but it still far outstrips the entire third world. Also, a considerable number of children in this country go to parochial and private schools that will educate them as tomorrow's leaders.

[The Old Hoosier]

If BBM is better, Citibank will buy them, you can bet on it.

Remember when non-IBM PC's were dismissed as "clones?" So do I. Not anymore.

[The Electrician]

Do you believe that only industry can practice laissez faire, but not the consumer?

No, I don't.

Do you believe that coercion founded solely on hyperbole and demagoguery leads to freedom and prosperity? That is clearly what is being advocated by many on this thread.

[neverdem]

I hope you're wrong. I'm going to ping you to another thread.

[Regulator]

With all the good paying jobs going overseas how do they expect us to buy what they sell?

They don't. They do, however, expect you to join the American military to protect their overseas assets wherever they may be. The English King used to do the same thing with German boys from the State of Hesse, aka, "Hessians".

[The Old Hoosier]

That's an interesting thesis about government jobs--I want to research the numbers on that one.

But generally, the standard of living has never been this good, and there's no economic reason on the horizon to say that we're losing our edge when new inventions come along constantly, the American small businessman is more crafty than anyone else, and the American worker can out-produce anyone on earth.

Want to see something really cool that's going to revolutionize both the utility industry and the consumer market, freeing up tons of capital, flattening energy prices and providing an explosion of economic growth within my lifetime? Check this out, and especially heed the parts about diamonds as superconducters:

http://www.wired.com/wired/archive/11.09/diamond.html

[Jim Cane]

Do you believe that coercion founded solely on hyperbole and demagoguery leads to freedom and prosperity?

You mean some emotionally based trend founded on hyperbole and demagoguery like "outsourcing"?

Look, a lot of people don't like it when Christians are portrayed as bumbling idiots in the media, or Jews portrayed as evil bankers. They boycott. It doesn't lead to prosperity for the producers of said garbage, but it sends a clear message that the marketing folks are missing from their demographic analysis.

As long as you expect Americans to purchase products from marginally "American" companies, you'd better think twice about firing the brothers and sisters of those Americans in order to offshore the work.

Marketers at IBM, take note.

P.S. I don't care if it hurts IBM or not given that IBM has domestic competition.

[BushisTheMan]

I recommend that every one of you e-mail this article about IBM's move to China, to your Congressman, Senator & the RNC. Suggest that "tax penalties" might be in order for IBM and the like.

Or, write your friendly IBM top exec and threaten to take your business to Dell. Remind them of the backlash that Dell endured when it tried to do the same thing. Tell them you want to have a help desk where you can understand what Help Desk consultant is saying instead of 1/2 English...etc.

Sam Palmisano, Chairman and Chief Executive Officer (sam@us.ibm.com)

Steven Mills, Senior VP and Group Executive SWG (smills@us.ibm.com)

Douglas Elix, Sr. VP & Group Executive, IBM Global Services (dougelix@us.ibm.com) - this is most likely to be the group hardest hit (Help desk/customer support)

J. Bruce Harreld, Senior Vice President, Strategy (harreld@us.ibm.com) - likely this bonehead's idea

John Iwata, Senior Vice President, Communications (iwata@us.ibm.com)

John R. Joyce, Sr. Vice President & CFO (jrjoyce@us.ibm.com) - the financial guy who hopes to save IBM big bucks for the execs own variable pay reward.

John Kelly III, Senior Vice President and Group Executive, Technology Group (jekiii@us.ibm.com)

Abby Kohnstamm, IBM Senior VP, Marketing (abby@us.ibm.com)

J. Michael Lawrie, Senior VP and Group Executive, Sales and Distribution (mlawrie@us.ibm.com)

Edward M. Lineen, Sr. Vice President & General Counsel (lineen@us.ibm.com)

J. Randall MacDonald, Senior VP - Human Resources (jrmac@us.ibm.com)

William Zeitler, Senior VP & Group Executive, IBM Systems Group (zeitler@us.ibm.com)

And please don't buy HP - they are on the list of American companies selling to Saddam.

[The Old Hoosier]

The end result: the wealthy executive class accumulates more, and the jobs of middle class people go offshore, and many of those americans are forced into lower paying jobs in the service sector.

More true to life is that middle-class Americans take the leading role in producing the next new thing, rather than continuing to produce yesterday's product. Experienced, skilled workers who are willing to take risks set out and start businesses or train themselves to find new work.

Historically, except when the government has artificially intervened with protections for industries that have failed to behave rationally and should be put out of their misery (ie the big airlines, steel, etc), the American economy has done whatever it has had to to adapt and produce something newer, bigger and better.

If the government could be shrunk, we would do even better. Every dime of federal spending, every dime raised through U.S. Savings Bonds and taxes, represents a dime that is being misallocated and could be invested and used to expand the economy and create jobs.

[The Electrician]

If the decision to boycott a company based on the extent of its offshoring were done on a rational basis, rather than on the emotional, demagogic basis that is being advocated here, then IBM would hardly be the right target. Instead, it would be an example of shooting yourself in the foot (or, insert your favorite cliche here - tossing the baby out with the bathwater, or whatever). The poster who bought HP instead of IBM is a perfect example of that - by mindlessly striking out at IBM, his actions have benefitted a company that is doing much more to undermine his supposed goals.

[At _War_With_Liberals]

Just curious- Why would you buy an IBM laptop for personal use?

IBM laptops are 100-200 more expensive than competing models, and come with less features.