Allen March 19th, 2004
William Bulkeley examines IBM claims of adding a net 2K to US jobs and finds the numbers don’t add up.
Read WSJ.com - New IBM Jobs Can Mean Fewer Jobs Elsewhere (paid subscription required) for the full details.
If IBM adds 2,000 net U.S. jobs this year, how could its activities result in fewer domestic jobs in the economy at large? For an explanation, take a look at just a few of the outsourcing contracts IBM announced in 2003. As part of these agreements it said it hired 4,000 computer professionals from J.P. Morgan Chase, 250 from construction giant Fluor Corp., 300 from ING Groep NV’s U.S. Financial Services unit, and 600 U.S. workers from Qwest Communications International Inc. Separately, IBM added 2,300 U.S. workers through its acquisition of Rational Software Inc.
That totals 7,450 jobs. But by the end of last year, IBM’s U.S. employment was up just 2,000, about what it expects to add this year. Where did the rest of the jobs go? Ex-IBM workers and analysts cite job cuts from previous outsourcing deals, including moving some of these jobs offshore.
The article goes on to note that only a small part of outsourcing winds up offshored.
The key to the whole outsource/offshore trend is to examine how a company views a particular process.
If a process is vital to the business, it will not be outsourced.
If a process is seen as purely an expense to be minimized, it will be outsourced (or offshore outsourced if possible).
If the company is right and the process is not vital to its business, they made the right decision to outsource the business process. Business are not run for the benefit of the employees. Neither are they run for the benefit of the customers. They are run for the benefit of the owners — be they [left-slant] fat-cat RNC neo-conservatives (spit, spit) [/left-slant] or poor pensioners examining their funds.
However, I think a lot of business are incorrect in thinking they are skillfully shedding non-core business processes.
Most of the times a customer who encounters poor customer service will not be back.
IT is difficult enough when the workers are located next to each other. Dislocated process owners and IT workers who attempt to realize the business process into code is a disaster waiting to happen. Of course, when you attempt to mold your business processes into a cookie-cutter solution, what becomes your strategic advantage over your competitors?
But right now outsourcing is the name of the game. And will continue to be the name of the game until high level managers realize it no longer makes business sense.
Those companies that bet too heavily into outsourcing may find their business future at stake.