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IBM giveth, taketh away
WSJ: Internal documents say millions of dollars to be saved by moving thousands of jobs overseas.
January 19, 2004: 3:00 PM EST

NEW YORK (CNN/Money) - IBM, the world's largest computer maker, has discussed saving millions of dollars by moving thousands of U.S. jobs offshore, according to internal documents obtained by the Wall Street Journal, the paper reported on Monday.

If accurate, the news is just the latest evidence of a growing trend towards offshore outsourcing of white-collar jobs, which has led some American labor groups to worry that U.S. wages and job opportunities will suffer.

According to the Journal, documents prepared in November and December 2003 show IBM executives saying they expected to save $168 million per year starting in 2006 by moving "several thousand" programming jobs to China, India and Brazil.

IBM would neither confirm the existence of the documents nor comment on their reported contents. It acknowledged it would move some jobs offshore in 2004, but said it had no specific plans. But the Journal said an IBM spokesman said the company planned to move about 3,000 jobs offshore this year.

Armonk, N.Y.-based IBM did tell CNNfn it plans to add about 15,000 jobs to its workforce in 2004, about 4,500 of which would be in the United States. The new jobs would bring IBM's global employee level to 330,000, the highest since 1991.

The U.S. economy has lost about 2.4 million jobs since February 2001. Many of those were manufacturing jobs, which have moved offshore to countries where labor costs are cheaper. That's old news in many ways -- the U.S. factory sector has been shrinking steadily for decades.

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But in recent years, companies -- including CNN/Money parent Time Warner (TWX: Research, Estimates) -- have moved white-collar jobs offshore in increasing numbers, a trend that seems unlikely to end any time soon. Consulting firm Forrester Research has predicted that, in the next 15 years, 3.3 million U.S. service industry jobs and $136 billion in wages will move offshore to countries such as India, Russia, China and the Philippines.

Though many economists say this cost-cutting will help businesses be more productive, leading eventually to more U.S. jobs, it's unwelcome news in the meantime for thousands of U.S. information-technology (IT) workers, who blame offshore outsourcing for a nagging lack of IT jobs and stalling wage growth.

This is not the first time IBM has been in the news for talking about outsourcing. In July 2003, the New York Times reported getting a copy of a recorded conference call in which IBM executives discussed the need to accelerate outsourcing efforts.

Also in July, the Web site of the Washington Alliance of Technology Workers, a labor group, offered a link to a Power Point presentation given by a Microsoft (MSFT: Research, Estimates) executive urging the software maker to "leverage the Indian economy's lower cost structure," where a company can get "two heads for the price of one."

The Microsoft presentation said several firms -- including Cisco (CSCO: Research, Estimates), General Electric (GE: Research, Estimates) and Dell Computer (DELL: Research, Estimates) -- already "have this religion" and that it was "time for Microsoft to join the party."

Workers to train their own replacements?

In Monday's report, the Journal said IBM pays U.S. programmers with three to five years experience about $56 an hour, including benefits, while IBM's internal documents say Chinese programmers with similar experience make about $12.50 an hour, including benefits.

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The Journal said the documents -- which may not be final versions of the company's plans -- offer managers pointers for moving jobs offshore, including ways to "sanitize" the news to U.S. workers losing their jobs.

"Do not be transparent regarding the purpose/intent" of offshore outsourcing, the documents reportedly say, warning that the words "'On-shore' and 'Off-shore' should never be used."

According to the report, some IBM programmers will be forced to provide "several weeks" of training to their replacements -- a common practice among other firms that move jobs offshore and a particular sore spot for U.S. IT workers.

The IBM documents discuss moving jobs from Southbury, Conn.; Poughkeepsie, N.Y.; Raleigh, N.C.; Dallas; Boulder, Colo.; among other locations, according to the Journal.  Top of page




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Market indexes are shown in real time, except for the DJIA, which is delayed by two minutes. All times are ET. Disclaimer Morningstar: © 2014 Morningstar, Inc. All Rights Reserved. Disclaimer The Dow Jones IndexesSM are proprietary to and distributed by Dow Jones & Company, Inc. and have been licensed for use. All content of the Dow Jones IndexesSM © 2014 is proprietary to Dow Jones & Company, Inc. Chicago Mercantile Association. The market data is the property of Chicago Mercantile Exchange Inc. and its licensors. All rights reserved. FactSet Research Systems Inc. 2014. All rights reserved. Most stock quote data provided by BATS.