Interesting People mailing list archives

I.B.M. Explores Shift of White-Collar Jobs Overseas

From: Dave Farber <dave () farber net>
Date: Tue, 22 Jul 2003 07:07:53 -0400

July 22, 2003
By STEVEN GREENHOUSE

With American corporations under increasing pressure to cut
costs and build global supply networks, two senior I.B.M.
officials told their corporate colleagues around the world
in a recorded conference call that I.B.M. needed to
accelerate its efforts to move white-collar, often
high-paying, jobs overseas even though that might create a
backlash among politicians and its own employees.

During the call, I.B.M's top employee relations executives
said that three million service jobs were expected to shift
to foreign workers by 2015 and that I.B.M. should move some
of its jobs now done in the United States, including
software design jobs, to India and other countries.

"Our competitors are doing it and we have to do it," Tom
Lynch, I.B.M.'s director for global employee relations,
said in the call. A recording was provided to The New York
Times recently by the Washington Alliance of Technology
Workers, a Seattle-based group seeking to unionize
high-technology workers. The group said it had received the
recording - which was made by I.B.M. and later placed in
digital form on an internal company Web site - from an
I.B.M. employee upset about the plans.

I.B.M.'s internal discussion about moving jobs overseas
provides a revealing look at how companies are grappling
with a growing trend that many economists call off-shoring.
In decades past, millions of American manufacturing jobs
moved overseas, but in recent years the movement has also
shifted to the service sector, with everything from low-end
call center jobs to high-paying computer chip design jobs
migrating to China, India, the Philippines, Russia and
other countries.

Executives at I.B.M. and many other companies argue that
creating more jobs in lower cost locations overseas keeps
their industries competitive, holds costs down for American
consumers, helps to develop poorer nations while supporting
overall employment in the United States by improving
productivity and the nation's global reach.

"It's not about one shore or another shore," an I.B.M.
spokeswoman, Kendra R. Collins, said. "It's about investing
around the world, including the United States, to build
capability and deliver value as defined by our customers."

But in recent weeks many politicians in Washington,
including some in the Bush administration, have begun
voicing concerns about the issue during a period when the
economy is still weak and the information-technology, or
I.T., sector remains mired in a long slump.

At a Congressional hearing on June 18, Bruce P. Mehlman,
the Commerce Department's assistant secretary for
technology policy, said, "Many observers are pessimistic
about the impact of offshore I.T. service work at a time
when American I.T. workers are having more difficulty
finding employment, creating personal hardships and
increasing demands on our safety nets."

Forrester Research, a high-technology consulting group,
estimates that the number of service sector jobs newly
located overseas, many of them tied to the information
technology industry, will climb to 3.3 million in 2015 from
about 400,000 this year. This shift of 3 million jobs
represents about 2 percent of all American jobs.

"It's a very important, fundamental transition in the I.T.
service industry that's taking place today," said Debashish
Sinha, principal analyst for information technology
services and sourcing at Gartner Inc., a consulting firm.
"It is a megatrend in the I.T. services industry."

Forrester also estimated that 450,000 computer industry
jobs could be transferred abroad in the next 12 years,
representing 8 percent of the nation's computer jobs.

For example, Oracle, a big maker of specialized business
software, plans to increase its jobs in India to 6,000 from
3,200, while Microsoft plans to double the size of its
software development operation in India to 500 by late this
year. Accenture, a leading consulting firm, has 4,400
workers in India, China, Russia and the Philippines.

Critics worry that such moves will end up doing more harm
to the American economy than good.

"Once those jobs leave the country, they will never come
back," said Phil Friedman, chief executive of Computer
Generated Solutions, a 1,200-employee computer software
company. "If we continue losing these jobs, our schools
will stop producing the computer engineers and programmers
we need for the future."

In the hourlong I.B.M. conference call, which took place in
March, the company's executives were particularly worried
that the trend could spur unionization efforts.

"Governments are going to find that they're fairly limited
as to what they can do, so unionizing becomes an attractive
option," Mr. Lynch said on the recording. "You can see some
of the fairly appealing arguments they're making as to why
employees need to do some things like organizing to help
fight this."

The I.B.M. executives also warned that when workers from
China come to the United States to learn to do technology
jobs now being done here, some American employees might
grow enraged about being forced to train the foreign
workers who might ultimately take away their jobs.

"One of our challenges that we deal with every day is
trying to balance what the business needs to do versus
impact on people," Mr. Lynch said. "This is one of these
areas where this challenge hits us squarely between the
eyes."

Mr. Lynch warned that with the American economy in an
"anemic" state, the difficulties and backlash from
relocating jobs could be greater than in the past.

"The economy is certainly less robust than it was a decade
ago," Mr. Lynch said, "and to move jobs in that environment
is going to create more challenges for the reabsorption of
the people who are displaced."

The I.B.M. executives said openly that they expected
government officials to be angry about this trend.

"It's hard for me to imagine any country just sitting back
and letting jobs go offshore without raising some level of
concern and investigation," Mr. Lynch said.

Those concerns were pointedly raised on June 18, when the
House Small Business Committee held a hearing on "The
Globalization of White-Collar Jobs: Can America Lose These
Jobs and Still Prosper?"

"Increased global trade was supposed to lead to better jobs
and higher standards of living," said Donald A. Manzullo,
an Illinois Republican who is the committee chairman. "The
assumption was that while lower-skilled jobs would be done
elsewhere, it would allow Americans to focus on
higher-skilled, higher-paying opportunities. But what do
you tell the Ph.D., or professional engineer, or architect,
or accountant, or computer scientist to do next? Where do
you tell them to go?"

The technology workers' alliance is highlighting I.B.M.'s
outsourcing plans to help rally I.B.M. workers to the union
banner.

"It's a bad thing because high-tech companies like I.B.M.,
Microsoft, Oracle and Sun, are making the decision to
create jobs overseas strictly based on labor costs and
cutting positions," said Marcus Courtney, president of the
group, an affiliate of the Communications Workers of
America. "It can create huge downward wage pressures on the
American work force."

Mr. Mehlman, the Commerce Department official, said
companies were moving more service jobs overseas because
trade barriers were falling, because India, Russia and many
other countries have technology expertise, and because
high-speed digital connections and other new technologies
made it far easier to communicate from afar.

Another important reason for moving jobs abroad is lower
wages.

"You can get crackerjack Java programmers in India right
out of college for $5,000 a year versus $60,000 here," said
Stephanie Moore, vice president for outsourcing at
Forrester Research. "The technology is such, why be in New
York City when you can be 9,000 miles away with far less
expense?"

Company executives say this strategy is a vital way to
build a global company and to serve customers around the
world.

General Electric has thousands of workers in India in call
center, research and development efforts and in information
technology. Peter Stack, a G.E. spokesman, said, "The
outsourcing presence in India definitely gives us a
competitive advantage in the businesses that use it. Those
businesses are some of our growth businesses, and I would
say that they're businesses where our overall employment is
increasing and our jobs in the United States."

David Samson, an Oracle spokesman said the expansion of
operations in India was "additive" and was not resulting in
any jobs losses in the United States.

"Our aim here is not cost-driven," he said. "It's to build
a 24/7 follow-the-sun model for development and support.
When a software engineer goes to bed at night in the U.S.,
his or her colleague in India picks up development when
they get into work. They're able to continually develop
products."

http://www.nytimes.com/2003/07/22/technology/22JOBS.html?ex=1059871927&ei=1&en=b4d0ef5418b14b97

---------------------------------

Get Home Delivery of The New York Times Newspaper. Imagine
reading The New York Times any time & anywhere you like!
Leisurely catch up on events & expand your horizons. Enjoy
now for 50% off Home Delivery! Click here:

http://www.nytimes.com/ads/nytcirc/index.html

HOW TO ADVERTISE
---------------------------------
For information on advertising in e-mail newsletters
or other creative advertising opportunities with The
New York Times on the Web, please contact
onlinesales () nytimes com or visit our online media
kit at http://www.nytimes.com/adinfo

For general information about NYTimes.com, write to
help () nytimes com.


-------------------------------------
You are subscribed as interesting-people () lists elistx com
To manage your subscription, go to
 http://v2.listbox.com/member/?listname=ip

Archives at: http://www.interesting-people.org/archives/interesting-people/

Current thread:

I.B.M. Explores Shift of White-Collar Jobs Overseas Dave Farber (Jul 22)