IBM lays off 15,000, HP 1300 [Outsourcing]

The Register ^ | 8/21/2003 | Andrew Orlowski

[ZeitgeistSurfer]

Veteran IBM-watchers know how testing it is to read one of the company's financial statements. In the early days of the cold war, Churchill described the Soviet Union as "a riddle wrapped in a mystery inside an enigma". But compared to earnings releases from companies such as Apple and Sun - who provide terse and lucid declarations - you can be forgiven for thinking of IBM's announcements as a cloud wrapped in a fog containing a temporary heat-haze.

However, this much is clear: IBM has shed 15,000 jobs in the past quarter: 1400 from the microelectronics division and a staggering "14,213 Global Services personnel" in response to "the recent decline in corporate spending on technology-related services". To balance the books, IBM also bunged its recent acquisition, PwC, by almost $400 million.

In an SEC filing posted last week, IBM maintained that demand was strong. So strong, it had to conduct a private pogrom in its own services division. Clearly, something doesn't add up - even by IBM's own admission.

Perhaps an email from a soon-to-be redundant HP employee to The Register sheds some light on the situation. HP announced earnings this week that fell below expectations and added that it would make 1,300 "unexpected" human sacrifices to cover the shortfall. In contrast to previous "sheddings" of fluff in the "labor market", the middle class now feels the pain.

"Sorry but I'm due in early Sunday to train my replacement in Bangalore," the (almost) ex-HPer explained. "It's because of the time difference."

Offshore drilling

Hidden beneath the already hard-to-find news of job cuts is a massive transfer of IT resources to India and China. While only a few years ago we were promised a "Long Boom" of infinite prosperity, by "gurus" such as Wired executive Kevin Kelly, it now appears that every tech job can be cut or outsourced with impunity. Kelly is never happier, by his own admission, than when he's lying down in Pacifica dreaming of insects.

For the rest of us, needs are rather more pressing.

Not to appear to be picking on IBM or HP in particular, there doesn't seem to be a tech job left that's safe.

This has yet to emerge as an election issue, although it represents an assault on middle class expectations that's unparalleled in peacetime. But it is important and needs some context.

As the world's largest democracy, and with a philosophical and scientific tradition that (outside the Muslim world) is second to none, India has every reason to look upon the recent occidental outbreak of what we call "capitalism" as a temporary aberration.

It's worth nothing that in common with his fellow Victorian political economists, Marx found the oriental model so strange that he excluded it from his theories entirely.

But outbreaks of tech independence abound. The People's Republic of China has shown both a cavalier disregard for Western IP (aka "intellectual property") and boasts a proud confidence that its own homegrown talent can transform a pay-for "IP" import into an indigenous social resource. [See Trade Wars II: China shuns Qualcomm - no CDMA tax! - EU frets over China's 3G plan and Motorola gambles big on Linux, Sinocapitalism for more details].

Given China's astonishing historical legacy of engineering excellence, this is far from foolish. Dammit, weren't our kids supposed to bring home the bacon?

On this side of the Gulf, we're sure to hear cries of anguish, as the parents of expensively educated middle-class kids learn that their investment (and, in the US, this can be upwards of $120,000 per child) has gone offshore.

Which brings us to a particularly anxious conundrum. The prosperity that we felt was assured, and by rights, ours in the West no longer belongs to us. Those college dollars look like a poor investment, when a cleverer Indian can perform the same task for a tenth of the salary. So why did we spend all that money? Who, at what point, added enough "value" to justify the investment?

It's a good question. In a historical perspective the Indian, Muslim and Chinese engineers whose forefathers created so much of this intellectual infastructure are only reaping their due rewards. For Western kids, however, this does seem a bum deal. "Weren't we supposed to be clever[-er] than everyone else?" a recent graduate asked me recently. Well, er, actually no.

Smarts is as smarts gets.

Forget your O'Reilly PERL course, and follow the money. A course in Mandarin or Arabic is probably the shrewdest investment a parent can make right now.

Go west, my son... and then keep going

The inexorable logic of digital capitalism has rewarded companies such as Dell, which add no value, and pare costs to the bone, and ruthlessly punished systems companies such as Sun and Apple, which invest in R&D. For reasons best known to themselves, these companies invest in the hard stuff that can't easily be commoditised. Logic suggests that such companies are the bulwark against copy-cat Oriental opportunism.

While you might think much of the above is facetious, the West faces a very real problem: we have a surfeit of well educated kids who, if we accept the orthodoxies of asset-stripping capitalism, simply can't compete with foreign competitors without tilting the playing field.

When capitalism went digital, the first casualties were manual laborers. Now that skilled engineering jobs are being transferred offshore, the middle class is in the firing line, and this poses a very real crisis for a large and not-entirely unimportant section of society. Go to college, learn tech skills and - oops, sorry - you're job has just gone offshore. Please accept this redundancy slip and some small token that your worthless (hard-earned) contribution has enriched the global economy. Or as the creepier types insist, the global "eco-system".

Technology once promised us vistas of endless prosperity, and saw itself aloof from the obligations of political economy or globalisation. Now these pigeons are coming home to roost, and "technology" is more of a liability than it is a blessing.

It's dry, academic stuff to be sure. But when jobs are being lost on such an extraordinary scale, scarcely reported, is there a politician bold enough even to raise the issue?

[BooksForTheRight.com]

Thank you for calling our attention to this big injustice.
We gave these companies the best years of our lives and they tell us to train our replacements and then get lost.

this site has more information:
http://www.toraw.org/

[warchild9]

Your saying "coservative" and "Republican" in the same sentence is a hoot. Stop listening to Rush, and pay attention to what they're doing in Washington.

[Tokhtamish]

Around the mid 1960s the US average per capita income was about 2-1/2 time what it is today.

Ha! Are you joking? Please show me the link to this stat.

Are you dimly aware that a non-high school graduate in a good union factory job with seniority in 1960 could buy a house, have health insurance, go away on paid vacation, send a child to college, and retire on a pension ? And all on one paycheck ? How many college graduates can do that now ?

[Texas_Dawg]

Around the mid 1960s the US average per capita income was about 2-1/2 time what it is today. We have been going straight down hill since.

You keep repeating this lie with no evidence to back it up. Because it's completely false.

After-tax per capita income in 1960 was $2,018. In 2002, it was $26,974. And none of that takes into account all the amazing things in our daily lives that have been created since then. Quit lying. U.S. Bureau of Economic Analysis

[Lazamataz]

Where do we gain that 20% and how long do you expect it to stay "on-shore"?

The true potential of the internet has only begun to be realized. Radio in the 20's was one thing, but is going strong and has expanded since then. Same thing with this new media delivery system.

We will keep things on shore that require user interface in order to accomplish.

[Texas_Dawg]

Are you dimly aware that a non-high school graduate in a good union factory job with seniority in 1960 could buy a house, have health insurance, go away on paid vacation, send a child to college, and retire on a pension ? And all on one paycheck ? How many college graduates can do that now ?

Are you arguing for unions?! Even if all this was true, our economy is far better off for far, far more people than it was then. That is just fact. Check my last post for a link to the economic data.

[riri]

Yeah, it is called "The New Financial Order--Risk in the 21st Century" written by a Robert J. Shiller. It is pretty interesting, he touches on globalism and the impact of new technology. He even mentions the, ever popular, Luddites. LOL

[warchild9]

One of my uncles was a deputy sheriff for years, and supported a household of four children on his pay alone. Try that now.

[harpseal]

No... that's why I don't want to imitate their trade policies.

Now what is Cuba's tariff schedule? can you provide a link.

[1066AD]

"Things in W's home state are just not that good."
You're right.

http://www.nttc.ws/index.html

[lelio]

You are Randian libertarian

Hey I resemble that remark! However I'm on the side of keeping jobs here in America as that's what made us the best country in the world. There's plenty of entry-, then mid-, and the upper- level jobs for everyone.

With offshoring I see a deteriotiation of the mid- and a contraction of the upper-. Most of what's done by the middle class could be offshored unless they have a direct needed physical presence.

I like to ask myself "What Would Ayn Rand Do" (WWARD). When presented with this offshoring trend I think she would say two things: "I told you high taxes would do this to companies" and "If you want to keep America as a novel place, figure out how to control it"

To ignore the problem with the idea that this is just the course of normal events is like a Buddhist in Tibet that lets the Chinese trample all over their country. We don't have to accept that jobs are going to move overseas, we can do things about it.

[CJ Wolf]

It was a Commie plot, I wrote about this a long time ago.

http://newstrolls.com/news/dev/CJ/111299.htm

The China Connection (operation fang).
November 12, 1999 - Washington

New evidence of the PRC Chinese infiltration into US government has surfaced. Sources deep with in the Justice Department have told NewsTrolls that the recent DOJ anti-trust suit against Microsoft was indeed an engineered attack on the most successful capitalistic company.

"PRC Chinese infiltration into the US Government has gotten so bad that now they have gotten the attack dogs out on Microsoft." Said the high ranking official who asked to remain anonymous.

She then detailed the scheme which started in 1993 after it was determined that Bill Gates was quickly becoming a capitalistic role model. Chinese "capitalists" then funneled money to President Clinton's campaign with the Presidents explicit promise of taking down the "beacon of capitalistic envy".

The master mind of the plan was a little known Chinese Government official named Charlie Xiang. Xiang was a lowly peoples technical worker stationed in one of the PRC tech front companies, when he acquired an older Sun workstation. He found it carelessly tossed in a dumpster at Lockheed Martin. Although he did not find the missile data he was looking for he did have his first encounter with an early version of LINUX OS. Amazed at the ease of use and cost (nothing) of the OS, he saw that it could be an instrumental pawn in the effort to help to take down Gates.

Xiangs plan to remove Microsoft from the pillar of power quickly made it back to Beijing and he was promoted to minister of controlled information and was given the go ahead to begin operation "Fang". The Xiang plan was discussed and finalized over tea with Clinton designee Janet Reno. Reno initially wanted to storm the Redmond compound and secure 'evidence' of weapons of mass monopoly, but Xiang instead insisted on his strategic 5 year plan with a long drawn out trial. The planned trial was to include mysterious e-mail evidence and used angry competitor bias.

The ingenious operation also included a well timed media assault on the company by activating Microsoft moles to create planted bugs in the new releases of Windows and NT and then use Mole hackers to exploit and "out" the bugs they planted. They also funded web-based underground media to further promote the free open-socialistic type operating system which Linus Torvalds developed in Socialist Finland.

Xiang repeatedly mentioned to his co-workers after finding the Sun, that Linux was most like communism in operating system choice and he claimed that it was a simple decision for Communist China to select this system as the OS-defacto. Xiang sent his Cyber troops out to foster acceptance of Linux by posting to various Usenet and other Internet message boards to convince the tech public that Linux was cool and hip. If the plan succeeded they would no longer have to kowtow to the capitalist greed of Bill Gates and pay $300 plus for a copy of software they could just easily copy.

But all does not go according to plan as demonstrated by Judge Jackson's wordy decision. He lambasted the communist operating system of choice as a "fringe operating system." Jackson continues with … "By itself, Linux's open-source development model shows no signs of liberating that operating system from the cycle of consumer preferences and developer incentives…".

Xiang was reported to be so very upset about the wording of the judgment, that he called Reno directly and yelled at her for over 20 minutes. Asking repeatedly why she could not control the Judges words.

While operation "Fang" is now in full effect, our source is warning us that the PCR is now fostering covert relations with both the Gore and Bush camps in order to continue their assault on US Capitalism. Their next targets on the list include Chip maker Intel and Networking Giant Cisco.


Can this DOJ source be trusted?

[Mad Dawgg]

"I fear for the folks who are just starting out, and have little kids. It's hard enough in the best of times, and baby, these ain't the best of times."

Yes Virginia, we are all gonna die!

Just yesterday I saw refugee-type camps spring right up in the middle of main street. Soup kitchens abound around our town and people with college degrees are burning their sheepskins to stay warm!

Its over, he's dead Jim!

[ARCADIA]

Actually, the average per capita income in the 60's was SIX times what it is today, taking into consideration tax increases (we pay an effective rate of 50-70% today, at all levels, depending on where you live and your bracket).

You are probably right. I only looked at the GDP adjusted for inflation and population levels for each reported year. The tax impact, especially those user/sin fees are massive.

[Tokhtamish]

Ayn Rand's ideology and theology are inextricably mixed. You cannot have a "might makes right" world view and still be any kind of sincere Christian.

[warchild9]

Ayn Rand believed a woman had the right to murder her inconvenient unborn children in the name of selfishness. What else do we need to know about her?

[theDentist]

I was out of work (in high tech) for > 18 months. I'm back in and every day I wonder if I'll get a message to come see the boss, and bring the laptop. Originally I thought the layoff was just because of the real Y2K outcome: lack of capital investment.

The Y2K scare was more a marketing ploy than a real problem. It made companies nation-wide (and world-wide) dispose of old equipment and outdated software and upgrade. And companies hired hundred of techs, programmers, analysts, etc to cover themselves, to keep up with demand and remain operational after 1999. They threw every spare cpital cash dollar at the effort. Then once we made it to 2000, the demand comes to a halt! Suddenly no one's ordering new software or hardware because they're all up-to-date. And now they have all these high-tech high-salaried engineers with little to do, and little capital available to cover them all. The layoffs were inevitible (sp?).

And when they start seeing that people in Asia will do the same job for 1/3 the price...

[harpseal]

See post 101 for a potential solution.

[warchild9]

Before quoting Rand, please see my 176. There are fundamental problems there.

[LibertyAndJusticeForAll]

Exactly which 1,300 layoffs are headed for India is immaterial to the fact that they are indeed outsourcing and will even be doubling the number to 10,000.

http://economictimes.indiatimes.com/cms.dll/xml/uncomp/articleshow?msid=140468
"The layoffs came days after reports that IBM was set to ramp up its workforce in India from its current 4,500 to 10,000 in the next two years."

http://infotech.indiatimes.com/cms.dll/xml/uncomp/articleshow?msid=61620
"IBM has about 5,000 people in India and is still expanding. Intel aims to double its staff by the end of ’04."