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."