Posted on 08/07/2003 5:25:07 AM PDT by Non-Sequitur
Hundreds of Sprint Corp. employees may lose their jobs as the Overland Park-based telecommunications giant moves forward with a plan to send certain technology jobs overseas.
Sprint chairman and chief executive Gary Forsee on Wednesday said competitive pressures had forced the company toward "offshoring" -- the growing trend of U.S. companies relying on lower-paid computer programmers as far away as India and China.
Sprint put out a request for proposals from outsourcing companies earlier this year and has since narrowed the list to two offshore vendors. Forsee said Sprint is conducting site surveys and is in "serious discussions" with the two companies.
"At the end of the day, it's several hundred jobs that could be impacted," Forsee said. "But we don't know what the ultimate result is."
A final decision on how to handle sending the jobs overseas is likely within 60 days.
Layoffs would not be immediate, Forsee said, because moving work to the outsourcing companies could take six to 12 months.
Forsee also said the company hopes to ease the impact of sending jobs overseas by moving some displaced workers to other information technology projects within Sprint and replacing existing contractors with Sprint employees.
Sprint already was considering moving jobs overseas when Forsee replaced William T. Esrey as the company's top executive earlier this year. But Forsee said he made the final decision to go ahead with the request for proposals.
Sprint already uses an offshore company for some customer service jobs. The company has outsourced information technology jobs to U.S. firms for years. But it has resisted sending information technology jobs overseas.
That has changed as Sprint, like other telecommunications companies, struggles with weak sales in what continues to be a difficult economy.
For almost two years, Sprint has been on a campaign to lower costs to compensate for soft sales. Since October 2001, more than 18,000 jobs have been eliminated. Hundreds of contractors also have lost work at Sprint.
Computer programmers and other skilled technology workers have been among the hardest hit, and there remains a severe shortage of available technology jobs in Kansas City and elsewhere.
Sprint's move toward sending jobs overseas will make a bad situation worse, said Rick Kumar, a former Sprint contractor who last year founded a support group for laid off information technology workers.
"The market is where it was a year and a half ago," Kumar said.
Many people still are out of work or have abandoned their information technology careers for other work, Kumar said. But unlike many of his information technology colleagues, Kumar said he does not blame Sprint and the many other companies that have turned to cheaper labor overseas.
"They have to follow the model or go out of business," Kumar said.
That is precisely how Sprint explains its move toward an offshore vendor. When competitors began cutting information technology costs by turning to offshore programmers, company officials said, Sprint was forced to look at following suit.
"We've got to stay on top of our competitive position," Forsee said. Offshoring "has become a significant trend that we hadn't participated in, so we looked at that as a strategy that was important...because of the competitive aspects."
IBM, Microsoft and HP are among the U.S. companies that are sending information technology jobs overseas or reportedly plan to start. Sprint must lower its cost to keep pace, Forsee said. But he knows careers are at stake.
"When you take actions like that, you're doing that hoping to keep the company as a whole strong," realizing that there are "people and careers and jobs at stake," Forsee said. "We try to do that part very carefully. It's not without significant consideration."
Shares of FON closed Wednesday at $14.05, up 1 cent. PCS closed at $5.41, down 36 cents.
I have a friend that's a bus driver. From what he says that 'simmering rage' is pretty prevalent on the busses too.
" Papers are available here" from Globalization of I.T.
While its true we have emphasized so-called traditional employment venues in this discussion, there are those (not everyone) who can start businesses on their own and succeed. We've seen them post right here on FR, people who have been washed out of the traditional employment environment but have found success working for themselves. But I'm not sure such a paradigm is applicable to the domestic workforce as a whole, or even a significant fraction of it. Certainly for specialized but important (from an intellectual capital viewpoint) endeavors, such might not be practical or desirable from a national security perspective. What I did at one point in my career, for example, neutron scattering research, where I needed access to specialized and expensive facilities. Or what one of my friends from grad school did, who was part of a group at a national lab who was involved in nuclear weapons design and testing, and who was sh*t-canned along with others when Clinton decided that it was more politically desirable to throw those people and their work away or sell it to the Chinese.
Likewise, in the IT sector, you might have a private consultant who is able to cut costs significantly working for themselves versus being part of a corporate organization. They can throw away costs such as some part of the overhead (big office buildings, multiple vice-presidents to sit around in meetings or push papers) and maybe do without health insurance for themselves, so they might get their costs down from $100,000 per employee-year to $40,000 per year (if they just pay themslevs a salary and spend on nothing else), but its still going to be hard for them to compete with Indian programmer Panjeeb Mumbleebumbleejay whose cost is $6,000 a year. An employee-owned textile mill in this country might be able to economize and streamline operations, but no matter how efficient they work, no matter how many costs they cut, their product per-unit cost will likely be higher than the similar mill in Manchuria whose employees work for food and the roof over their heads.
So what do you do then? You can't increase productivity and cut costs to the point of matching the outsourced product's cost. You aren't going to have much luck getting your workers to accept the lower wages and reduced standard of living to bring them in line with the outsourcing competition (the unions and Rats will tar and feather and run out of town on a rail anyone in a position of power who advocates such a thing). So you see exactly what we've seen on this thread, advocation of protective measures. Or what I've done, made pleas (so far ineffective) to persons in positions of authority in business and government not to make short-sighted decisions, but to consider the impact of their decisions not only on individuals and families, but on the welfare and future of the country as a whole, and maybe live with (slightly) reduced corporate proits, or keep that government-funded program that, while costing taxpayers a little in the short term, is still useful and productive in the long term.
What determines the outcome of competition in the marketplace is the acceptable by consumers of a product at a given price. We were discussing earlier in the thread that current business strategy seems to be to price the good/service at what the market will bear (assuming that is above the cost of what it costs to bring the product/service to the market). That is, if it costs you $29.99 to outsource the preparation of a tax return in India, and it costs you $39.99 to do it domestically, and the consumer is willing to pay $59.99, chances are both providers are going to offer it at that price. Where lower costs help you is that you either get a larger profit margin or it gives to more leeway in being aggressive in your pricing.
The key is where does the incremental difference leave you in terms of being profitable. What I am saying is that if your corporation shows a quarterly profit inrease of 25% because you outsourced your IT department to India and fired all your American workers, versus showing a quarterly profit increase of 24.9% because you kept your IT department intact, please, for the sake of those hardworking employees and their familes and the long-term viability of a technologically-capable workforce, keep the IT in-house. Under those circumstances, your stock might show a per share price rise of 14.9% instead of 15% for the year, and maybe your dividend payout might be 99 cents a share instead of a dollar, but I would appeal to businessmen and shareholders alike to be satisfied with the "smaller" gains for the sake of keeping this country's best and brightest gainfully employed, instead of turning Ph.D. engineers and the like into hamburger flippers.
Certainly for marginal businesses, where the lower cost of outsourcing literally means the difference between life and death, then such a choice may not be possible. But, chances are, those kinds of operations may not employ large numbers of IT or research personnel anyway. They will just have to do what they have to do to survive which, if saving a few tens of thousands of dollars a year makes such a drastic differnce, may be problematic anyway.
As much as it pains me to say this, the only way out of this pending economic disaster is for the government to show some leadership and work out a system of lower internal taxes and higher tariffs. Make it so that there's a reason to hire Americans and invest in this country, versus spending billions on a plant overseas.
The positive reinforcement aspect of your suggestion is appealing. Find a way to make it better for companies to use domestic labor resources where possible. And I mean real incentives, not some kind of cheerleader "Buy American" program. Maybe things like industry-government partnerships on R&D functions, reduced corporate taxes and the like. But, like yourself, I am becoming a reluctant convert to the idea of at least some kind of protectionist measures. I just don't see how, no matter how efficient and productive we become, we can compete with countries who pay their workers with food and shelter instead of wages.
How long will it be before the outsourced labor makes demands for higher wages, unionizes, etc.?
Discontent cannot be far off.
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.