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IBM lays off 15,000, HP 1300 [Outsourcing]
The Register ^ | 8/21/2003 | Andrew Orlowski

Posted on 08/21/2003 9:44:06 AM PDT by 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?


TOPICS: Business/Economy; Extended News
KEYWORDS: hp; ibm; outsourcing
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To: warchild9
So you get your facts from restaurant tables? Atta boy!!
61 posted on 08/21/2003 10:22:50 AM PDT by RedBloodedAmerican
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To: MonroeDNA
WE'RE ALL GONNA DIE!!!

Women, children and minorities no doubt will be hit hardest.

62 posted on 08/21/2003 10:23:27 AM PDT by dfwgator
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To: Lazamataz
I plan to raise my rates pretty significantly

You won't get a dime more until you shave your back.

63 posted on 08/21/2003 10:24:21 AM PDT by RedBloodedAmerican
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To: Grando Calrissian
So you must think the country (culturally, morally, spirtually) must be in much better shape today than in previous times. I don't think a glut of Chinese doodads at Walmart is any indication of the health of the nation.
64 posted on 08/21/2003 10:24:35 AM PDT by ZeitgeistSurfer
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To: MonroeDNA
Time to restock the Y2K bunker with cigarettes, gold and spam.
65 posted on 08/21/2003 10:25:25 AM PDT by Grando Calrissian
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To: ZeitgeistSurfer
It's not all going, despite the chatter. A few jobs over here are opening. Interestingly too, I know a company that's outsourced for years, with a team of programmers in Russia. Despite that, they recently moved another of their brightest lights from somewhere back of Toronto to their HQ in (very expensive) Boston.
66 posted on 08/21/2003 10:26:04 AM PDT by Eala (When politicians speak of children, count the spoons. - National Review Editors)
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To: RedBloodedAmerican
You won't get a dime more until you shave your back.

Not that rate, silly.

I still *give* that away.

67 posted on 08/21/2003 10:26:07 AM PDT by Lazamataz (I'm pretending I'm pulling in a TROUT! Am I doing it correctly?)
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To: warchild9
I remember in the early 90's when the boom was Cary, RTP, NC. My company moved many jobs down and I was one of them. Up here in the north there were screams of simliar echos here on this board and Shortly after the company moved down they were having trouble finding quality workers. I moved back in 96. Massive education efforts were launched. Now we are sending the jobs elsewhere. You may have to move again. I hope your house is not too depressed in the market, it is sad.
68 posted on 08/21/2003 10:26:28 AM PDT by CJ Wolf (I hear India is hiring.)
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To: ZeitgeistSurfer
Sarcasm won't change the facts on the ground. Sooner or later, people are going to be very, very angry that their futures have been sold off. And we are talking about middle class people. They won't just sit still for the "globalization makes us all richer" arguments.

For some reason, the free traders think that in a representative republic, people whose careers have been lost to offshoring will gladly vote for more of the same out of some Randian religious conviction. They fail to see that the end result will be the establishment by the electorate of the very Socialist state they so despise.

69 posted on 08/21/2003 10:27:05 AM PDT by RogueIsland
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To: kafir
I received a CS degree in '91 (Univ of CT), and to me it's completely useless in IT. Sure, it was fun desiging digital circuits on breadboards, but it doesn't do me much good now.

If I were to do it again (what the #$%!@ did I know at 18) I would learn a discipline (accounting or other business, engineering, actuary, etc.). Anybody can program, and you're only as good as your last job anyways in IT.

With jobs being shipped out, it's good to have a skill where you're physical presence is required
70 posted on 08/21/2003 10:27:19 AM PDT by JacksonCalhoun (And how exactly will the RATS solve this?)
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To: dfwgator
Women, children and minorities no doubt will be hit hardest.

That will definitely be the consensus at FR, I can promise you.

71 posted on 08/21/2003 10:27:26 AM PDT by Texas_Dawg (I will not rest until every "little man" is destroyed.)
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To: cherry
Dang that's a good point. I just got laid off in June 1, a lucky guy named Ramesh got my job in India. I was thinking about going into teaching here in CA, but I thought the $39,000 startng salary was just too low considering what I was making $70,000 in the IT field... I might as well pursue it, because in a few years you will be right and the $39,000 will be something to swoon about!
72 posted on 08/21/2003 10:27:40 AM PDT by MelBelle
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To: ZeitgeistSurfer
I must have missed it I guess. I didn't see where HP said the cuts were for "[Outsourcing]".

Basic business economics? How can you keep up same expenses when the income drops?
73 posted on 08/21/2003 10:27:47 AM PDT by RedBloodedAmerican
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To: Grando Calrissian
Unsupportable public and private debt, unstopped foreign invasion, shrinking industrial base, fianancing an obvious peer competitor, a profoundly corrupt political system...there's more. With the exception of the latter, we didn't have these problems in WWII (and I know, since my present PhD thesis covers many of these topics...you'll get to see it when I publish).
74 posted on 08/21/2003 10:28:00 AM PDT by warchild9
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To: ladysusan
Thank Bush..he just outsourced many jobs to India.
75 posted on 08/21/2003 10:28:06 AM PDT by MatthewViti
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To: Lazamataz
You're not only easy! You're cheap, too!
76 posted on 08/21/2003 10:28:36 AM PDT by RedBloodedAmerican (when's your IPO ?)
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To: ZeitgeistSurfer
I still believe national security issues will dominate 2004.

The biggest national security issue we have is our wrecked economy. By this time next year, congress is going to have to bail out California, and a long list of other states and the attack on Iraq is going to be a distant memory, long replaced by an expensive aftermath and negligible results. It doesn't matter if Al Queda detonates dozens of nukes next year, the key issue is still going to be the economy.
77 posted on 08/21/2003 10:28:36 AM PDT by ARCADIA (Abuse of power comes as no surprise)
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To: RedBloodedAmerican
Bots may celebrate W, like yourself, but every job lost is another person going over to the Democrats. I won't predict W will lose North Carolina, but given a stronger candidate on the other side, it won't surprise me.
78 posted on 08/21/2003 10:29:25 AM PDT by warchild9
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To: sinkspur
Your true colors as a Bushbot are showing. From the 10 Commandments threads to here.
79 posted on 08/21/2003 10:29:36 AM PDT by MatthewViti
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To: RedBloodedAmerican
You're not only easy! You're cheap, too!

It's hard to insult me when I say the exact same thing, y'know. :o)

80 posted on 08/21/2003 10:29:47 AM PDT by Lazamataz (I'm pretending I'm pulling in a TROUT! Am I doing it correctly?)
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