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    Highlights for week ending July 26, 2003
  • New York Times: I.B.M. Explores Shift of White-Collar Jobs Overseas. Excerpts: 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. ... 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. ...

    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. ... "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?" ...

    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?" ... If link is broken, view Adobe Acrobat version [PDF--36 KB].


  • Wall Street Journal: IBM Declines to Comment On Reported Job Transfers. Excerpt: International Business Machines Corp. has no comment on reported plans to accelerate the transfer of some of its white-collar jobs overseas. An article in Tuesday's edition of the New York Times reported that two senior officials at IBM told their corporate colleagues in a recorded conference call that the company needed to accelerate its efforts to move white-collar, often high-paying jobs, overseas. William Hughes, a spokesman for the Armonk, N.Y.-based computer giant, declined to discuss the article, saying that "we don't comment about internal meetings at IBM." ... While expanding its job force, IBM has also eliminated positions in part of the company. In the last two years IBM has cut more than 16,000 jobs-a reduction program that the company characterized as "skill rebalancing." Many of those laid off were rehired in other positions within the company, Hughes added. Stephanie Moore, vice president of outsourcing at Forrester Research estimates that IBM currently has about 4,400 employees in India, Russia and Mexico working on U.S.-based company contracts. Those jobs in a previous era would most likely have been based in the U.S. Ms. Moore said that workers overseas are not only cheap but also good. The quality of work in India, for instance, rates among the highest, even higher than that of the U.S.'s, she said. A programmer in India makes about $5,000 a year versus $60,000 in the U.S.
  • If link is broken, view Adobe Acrobat version [PDF--33 KB].

  • "mrs_adm" comments. Full excerpt: Let me state categorically that IBM's response to this is a complete out and out lie ("An IBM representative said there are no formal plans to move jobs out of the U.S. to areas with lower labor costs"). I know for certain that IGS has numbers of jobs (held very confidentially at high levels) it plans to move out of the US in the next year. It is well over 20,000 jobs. They have a project office to plan the execution. They also have a goal to move ALL IBM internal account support overseas. DO NOT BELIEVE THE SPIN/LIES. The only way IBM US jobs can grow is by "strategic outsourcing" (SO) where IBM acquires the employees of other companies, then streamlines and downsizes many of them. Also, bean counter is right on. Print the NY Times article and mail it to all your US representatives and demand they respond! You can also go to http://www.washtech.org and send an action notice to your reps to support a GAO study of offshoring. Personally I think it is too late for a study -- we need legislation NOW to stem this horrible trend.


  • MSNBC: IBM sees need to shift jobs overseas. Report: Firm seen moving workforce to India, elsewhere. Excerpt: In a recording of a conference call given to The New York Times by a labor union, top employee relations executives said IBM needed to make the same moves its competitors made to save money by shifting service jobs away from the United States. ... Executives worried on the March IBM conference call that broader unionization could arise as the trend strengthens, The Times said. “Governments are going to find that they’re fairly limited as to what they can do, so unionizing becomes an attractive option,” said IBM director for global employee relations Tom Lynch 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.”


  • Ready to "do some things like organizing to help fight this?" Join the Alliance@IBM. "Subscriber" memberships are free. Voting memberships are only $10 a month. Do you have questions about Alliance membership? Check here for answers.


  • Alliance@IBM: Meetings this Monday about Offshoring. Come hear the revealing tape of IBM HR discussing how US jobs will move offshore. Learn what you can do to help stop this alarming trend and help save US middle class jobs. Click here for locations and times.
  • (Locations include Mid-Hudson Valley, Burlington, Endicott, and Rochester, MN).

  • AFL-CIO: White House to Public: Don’t Contact Us. Excerpt: Don’t try communicating with the White House by e-mail—especially if the subject is on the nation’s soaring unemployment rate. Concerned citizens sending messages to president@whitehouse.gov this week received automated responses redirecting them to a series of complicated webpages at www.whitehouse.gov/webmail. There, they were asked not only to give their addresses but also to pick from a list of issues and indicate whether they support the Bush position on those issues. Given the 6.4 percent June unemployment rate, the highest in 10 years, and the loss of more than 3.1 million private-sector jobs since Bush took office, a couple of topics from the list provided by the White House were noticeably missing: “jobs” and “unemployment.”


  • "ive_been_mugged" notes the upcoming "Values Jam" on the IBM intranet and suggests IBM employees participate. Full excerpt: Just read on the W3 homepage about the "ValuesJam" scheduled for next week. I didn't listen to his speech this morning, but I'm assuming he mentioned this. My first thought was "Yeah, right...I'm sure you really want to hear how to get some real values back into this company?" But then I thought, what the heck, maybe this is the time for all of us to actually say out loud (or more like, type out loud) to Palmisano what has been said here a million times. Might be worth all of us posting to that "jam" what values we think are lacking in IBM today, and what could be changed to fix it. Anyway, the info on how to participate is here: http://w3.ibm.com/news/w3news/top_stories/2003/07/17_ready_valuesjam.html. (Editor's note: This link is available only from inside IBM's intranet.)


  • Wall Street Journal: Pension Reform for Fruitcakes. Excerpt: The House of Representatives, as everyone knows, is that place where the Members address each other as "the Gentlemen from California" or "the Gentlelady from Connecticut." Alas, like much else in America now, these standards of dignified human discourse are under pressure, as reflected in the following colloquy Friday before the Ways and Means Committee. Mr. McInnis of Colorado to Mr. Stark of California: "Shut up!" Mr. Stark to Mr. McInnis: "You think you are big enough to make me, you little wimp? Come on. Come over here and make me. I dare you. You little fruitcake. You little fruitcake. I said you are a fruitcake."


  • Janet Krueger answers this question: Why are so many people impacted by this issue when presumably they had the same opportunity to retain the conventional plan at the time the cash balance plan was first implemented? Full excerpt:
    1. Thousands of employees weren't quite 40 on July 1, 1999, but had between 10 and 20 years of service—some of them are still in wear-away, accruing not pension benefits at all until such time as the value of their new virtual cash balance catches up to their frozen vested benefits from July 1999.
    2. Some of us discovered, while researching the plan changes, that the plan you retained wasn't conventional at all—it was something called a pension equity plan, and is even more age discriminatory than the cash balance plan. That is why Cooper v IBM, filed in October 1999, accuses IBM of giving you a choice between two plans that illegally discriminate by age. We are expecting a ruling from Judge Murphy any day now—no matter who wins, the next step will be the federal appeals court.
    3. Even though you were given a choice of retaining the older pension plan, you still lost most of your promised retirement health care benefits—some lost more in the conversion to the future health accounts (which are not vested at all, and could complete vanish at any time) than they did in the cash balance conversion.
    4. Many older employees, after heaving a sigh of relief at being allowed to choose the older plan, have since been involuntarily laid off. In many cases, this happened when they were just months short of being able to qualify for full retirement benefits.
    5. We all know now that IBM feels they are free to cut your pension benefits whenever they want. Historically, they have done so every 3 to 4 years, so you are probably due for another cut before too much longer, IF you IBM decides to keep you on.

  • ABC News: Downwardly Mobile. More and More Professionals Forced to Take Low-Paying Jobs. Excerpt: Indrajeet Bhonsle sits perched behind his computer screen in Bountiful, Utah, taking orders for clothing and porch furniture for a national retailer. Don Dolan has a job selling movie tickets at a Chicago-area cinema. Both are case studies in downward mobility. Months ago, Dolan and Bhonsle earned high salaries in high-powered jobs. Now they are among the 4.6 million Americans considered underemployed. Many are middle-class workers who saw their manufacturing and high-tech jobs vanish in the recession. Now, just to survive, they are forced to take jobs that offer less money and responsibility or fewer hours. "Seventeen months ago I was making six figures," said Dolan wistfully. "Right now I am making $6.25 an hour, and that's after a quarter raise last month." Dolan's paycheck — $120 every two weeks — is barely enough to feed his family and put gas in the car. But the cinema job is the only work this 45-year-old father of four could find since he lost his job designing computer systems. Since then, he has frantically searched for another full-time job in his field.

Coverage on H1-B and L1 Visa and Outsourcing Issues

  • TechsUnite.org: Seattle: High-Tech Bridge to the 21st Century, or to Nowhere? Excerpts: I went to Seattle to speak to a meeting of the Society of Professional Engineering Employees in Aerospace (SPEEA). This union represents the Boeing workers who do the company’s research and development, engineering, and design. SPEEA members, in other words, have done everything that globalization cheerleaders have advised American workers to do to ensure success in the new global economy. And of many of these engineers and technicians once considered themselves immune to the outsourcing wave that swamped so many of their blue-collar counterparts. No longer. Today, the engineers worry that their jobs, too, will be sent abroad -- both to high-wage countries like Japan, which demand aerospace production work for their people as the price of awarding contracts, and to low-wage countries like China, India, and Russia, with huge numbers of highly educated scientists and technicians who will work for peanuts.


  • Computerworld: Does outsourcing offer savings at too high a price? Excerpt: But perhaps the most serious complication caused by offshore these days is security. As stated earlier, software applications are assets and can contain critical company processes and secrets (just think of a power plant process). In today's world filled with terrorism, how can there be assurance that the software applications, critical processes and secrets aren't being disseminated to those who might want to harm the company or the U.S.? It is difficult enough to maintain good security processes in this country. Would background checks in certain offshore countries be at all relevant? With all of the offshore work being done today, there are very few success stories. About the only thing that offshore has truly accomplished is the elimination of significant IT job opportunities in the U.S., thus placing our economy in further peril.


  • Computerworld: Yahoo sets up India development center. Excerpt: Yahoo Inc. has set up a software development center in India that will focus on the development of products and technologies to be deployed by Yahoo's Web sites worldwide. The center in Bangalore, the first research and development center set up outside the U.S. by Sunnyvale, Calif.-based Yahoo, is expected to have 150 engineers by the end of next year. Some product development work has already begun at the center.


  • Insight on the News: The Jobbing of Americans. The United States continues to lose jobs. Since President George W. Bush has been in office, 2.5 million manufacturing jobs and nearly 600,000 service jobs have been lost for a total decline in private-sector employment of 3.1 million. The unemployment rate has risen to 6.1 percent. If this is recovery, what is going on? Pundits call it "the jobless recovery." The economy is growing, but jobs are not. Why? One economist recently blamed the absence of job growth on high U.S. productivity. Those who are working are so productive, he said, that their output meets demand, making additional jobs superfluous. His solution, apparently, is to make people less productive. I think that the jobless recovery is an illusion and that the U.S. economy is creating jobs - but not for Americans. Those 2.5 million manufacturing jobs have not been lost. They have been moved offshore and given to foreigners who work for less money. The service economy was supposed to take the place of the lost manufacturing economy. Alas, those jobs, too, are being created for foreigners. It turns out it's even easier to move service jobs abroad. For example, 170,000 computer-system-design jobs recently have been shifted abroad. Keeping knowledge-based jobs in the United States is proving as difficult as keeping manufacturing jobs.


  • IEEE: 500,000 U.S. IT Jobs Projected to Move Overseas by Year-End '04; IEEE-USA Sees Continued Loss in U.S. Economic Competitiveness. Excerpt:One-half million jobs, or 10 percent of the U.S. information technology (IT) professionals currently working in IT services firms, will be displaced in the next 18 months as their jobs move overseas, according to Gartner, Inc., the Stamford, Conn.-based research firm. The Gartner projection, in a 15 July research note by Diane Morello, would bring total IT job losses to one million, when added to the 500,000 IT professionals estimated by the Bureau of Labor Statistics to have lost their jobs in the United States since 2001. In addition, Gartner urged business executives not to "trivialize" the impact of offshore outsourcing on their businesses and employees, stating that executives should pay attention to the loss of future talent and intellectual assets, as well as the potential negative impact of outsourcing on organizational performance. Commenting on the projection of U.S. IT job losses, IEEE-USA President-elect John Steadman said: "In the rush to cut costs through offshore outsourcing and increased use of guest workers, companies are undermining the U.S. IT profession and are increasing the vulnerability of their core competencies and knowledge base." Dr. Steadman, who will become IEEE-USA's president in 2004, added: "The emphasis on outsourcing to cut costs may help boost quarterly earnings, but it is also putting our nation's long-term economic competitiveness and national security at risk as we give up our technology edge for short-term profits."


  • Star-Telegraph: Going abroad. More U.S. technology companies are shifting jobs to India where cheaper, educated labor is plentiful. Excerpt: Jobs have been hard to find for three years in tech centers like Plano and San Jose, but not in places like Mumbai and Bangalore. Dell Computer, Electronic Data Systems, i2 Technologies and Microsoft are among a growing number of U.S. companies opening customer care and software development centers in India.


  • ZDNet: Outsourcing: Love it--or leave it? More and more tech companies are sending projects overseas to take advantage of lower costs and a cheaper work force. U.S. workers see this as a threat to their livelihood, resulting in fewer jobs and lower pay. But the companies say tough times require them to reduce expenses or risk losing even more jobs--by going out of business.
    • Analyst: India backlash to last two years. Gartner analyst predicts an economic recovery will silence critics who oppose outsourcing services to India, according to newspaper reports.
    • Report: IBM to outsource white-collar jobs. The New York Times obtained a recording of an IBM conference call in which executives urged the company to speed up its efforts to shift jobs overseas.
    • Outsource coding? When, not if. Software company leaders agree that the use of lower-wage developers overseas is key to survival, but they debate on when to make the big move.
    • IT outsourcers draw a vertical line. Companies that offer information-technology outsourcing services are putting more emphasis on vertical markets, says an IDC report. Leading the way are IBM and EDS.
    • Study: Software makers head offshore. Lured by low labor costs, more than eight in 10 software companies are shipping work offshore today or will do so in the next year, according to a study.
    • India group: Outsourcing saves U.S. jobs. Sending software coding and business process jobs out to India have improved employment figures in the United States, says an Indian IT association.
    • Does outsourcing make sense for your organization? In this interactive Webcast, ZDNet's Dan Farber consults the experts on what to outsource; choosing a service provider; understanding key risks and hidden costs; and managing a successful transition.
    • Study: More software gloom ahead. The software market continued shrinking last year and is unlikely to recover in real terms until 2007, according to a report from research group Ovum.
    • Outsourcing grows--competition heats up. Offshore outsourcing is the fastest growing segment in the global tech sector but the leading Indian firms are now facing tougher competition.
    • Study: U.S. to hold onto tech lead. The United States will stay at the helm of the global technology scene for years to come despite the rise of Asia as a tech manufacturing powerhouse, according to a U.S. government-funded study.
    • Who's cashing in on overseas outsourcing? Companies such as NeoIT and The Woodlands, Texas-based TPI, which focuses on outsourcing arrangements for clients such as J.P. Morgan Chase, Procter & Gamble and General Motors.
    • The hidden costs of cost cutting. Commentary: Cost cutting and promised near-term ROI doesn't always lead to savings or the much vaunted reduction in complexity. In fact, cost cutting and reducing complexity are frequently out of synch.
    • Nights can drag at an Indian call center. It's the first job for many new graduates who are paid about $215 a month, work 10-to-12 hour night shifts, and adopt an American-sounding name to man a call center in India.


This week on the Alliance@IBM Site:

  • Champlain Channel 5 WPTZ News (Vermont): IBM Cuts Workers' Hours -- And Paychecks. Excerpt: Instead of cutting jobs, IBM is cutting hours on the manufacturing line at its plant in Essex Junction. That means 2,400 workers will still be employed, but will bring home a little less in their paychecks. IBM said it's feeling the pinch of a slowdown in the semiconductor industry, and reducing work hours is something the company has done before when orders slow down.


  • CBS MarketWatch: IBM's global plans irk cyber-clan. Excerpt: Patriotic investors traipsing through cyberspace this week took strong exception to Big Blue's apparent move to flex the 'I' in IBM. Two senior officials at the technology bellwether, told their corporate cronies that the company needed to increase its attempts at relocating more white-collar jobs overseas, according to a report in The New York Times, Needless to say, the outpouring of corporate devotion and understanding on the Web wouldn't fill a Monopoly thimble. Over on Fark.com, YF took part in one of the site's most active discussions with this lyrical quip: "Software with a curry flavor won't curry favor with me." From there, the feedback turned a bit nastier. From Zebra55: "If American companies would keep the damn jobs in the U.S. instead of trying to be such cheap!@#$, they'd quit shooting themselves in the foot in the long run. Or at the very least they'd quit hanging its citizens out to dry in the interest of making a buck." More of the same over on Yahoo, where McCoolister led the charge: "With the elimination of jobs and the decrease of wages here in the U.S., who buys the new homes, new cars, home electronics, etc? Who generates tax revenue? Who will be buying products and/or service from America's corporations? If you say they are going to sell and provide service to those 'low bidder' country's citizens, those workers wage levels only have one fifth the purchase power." ... What do you think? Stop by CBS MarketWatch's IBM discussion group and share your thoughts.
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