IBM Outsourcing and Impact on Domestic Employment

It was revealed recently that one third of the employees of IBM are located in India. How is this possible?

- Oct. 2017

IBM is an international corp. that was founded in 1911 by Charles Flint. It is now a global company with presence all over the world. I was an employee from 1074-2002 first in the Communications Product Division and later at the reknown Research Division at Watson Lab. At its height, IBM was on the top 10 list of Fortune 500 with worldwide employees above 400,000 people. IBM was lead by Thomas Watson Sr. and later his son Thomas Watson Jr. back in the 1960s which took a gamble and invested in the new business machines of the modern programmable computers. The success of the 360 series of computers pave the road for its domination of this industry for the next 40 years.

In recent years, the company has suffered from changing technology to a web based and distributed computing environment. The main frame computer, the bread and butter of IBM, is on the decline. In 2002, the company bought PWC in an attempt to branch out to the consulting business.

Price Waterhouse was one of the big 8 accounting firms in the 1980s. After a huge scandal with Arthur Anderson, the acoounting firms broke up into smaller units. PWC was one such companies that focused on consulting Services. It became profitable for some companies to oursource some of their workforce overseas. The price of labor was lower by a factor in India and later China. In 2002, IBM was struggling to re-invent themselves.

IBM bought PWC in an attempt to expand more into the consulting services. The problem with outsourcing is that it is a one time savings event. The other issue has to do with logistics. In IT for example, there is a time difference between India and the mainland US. The language is also a huge drawback. Many Indian workers speak English with an accent. It is hard for US customers to communicate with tech support when they are based in India.

In the case of PWC, their expertise in consulting leads to providing their customers with similar advice. For example, my wife works at Philips who is a customer of PWC. IBM provided the guidance to help Philips outsource their IT group to India. When my wife, who works from home, had an issue with her laptop, she needed to contact the IT support based in India. Needless to say, it was not a pleasant experience.

Another work related trend was for large companies to close down their offices and convert their employees to telecommute. This was advantageous for mom's in the workforce and also saves companies on office space and infrastructure. On surface, it seems like a win win. However, it leads to abuses by some employees who use this to play hooky while on company time. It also created an environment where workers tend to have less face to face interactions with their peers.

In a reversal, in recent months, Yahoo and IBM has ordered their employees back to the office. It seems to me, it should have been obvious that extended work at home cannot be good for any business. Where is the teamwork that is so crucial to any business?

When President Trump was elected in 2016, there was a rush of business leaders to support his Make America Great Again agenda. They announced efforts to hire US workers and building new plants and bringing jobs bsck from overseas. The CEO of IBM, Ginni Rometty was one such executive. However, it was an empty promise. While hiring a token number of employees, they were outsourcing big time and advising their clients to do the same.

It is reported that IBM has declining revenues for 21 straight quarters. With all the outsourcing, IBM has not generated any growth. The savings from these actions and the sale of many assets are only one time events. IBM has no where to go but down.

The impact on the US employment rate cannot be under stated. It is a shame that American workers are being systematically replaced by foreign workers and in some cases forced to train their replacements. The granting of H1B VISA to foreigners is also a point of contention. Why is our large international corporations pushing for these VISAs when our own workers are being laid off in large numbers? These VISA were suppose to be for specific skills that we lack domestically. They are being abused by Microsoft and Google and Amazon and many high tech companies. The American workers are the sacrificial lamb at the alter of globalism.