IBM Counters Suggestion in Economic Report That It’s Sending Massachusetts Jobs Offshore

2/7/08Follow @wroush

We got an interesting e-mail on Tuesday from the global communications staff at IBM. The company was concerned about the message some readers might be taking away from an economic report published last Friday, the Massachusetts Technology Collaborative’s 2007 Index of the Massachusetts Innovation Economy.

That report’s executive summary emphasized the growing challenges for Massachusetts companies in the face of international competition, and it listed IBM, alongside General Motors and Microsoft, as one of several U.S. companies expanding its global footprint and hiring large numbers of employees in places like India and China. In their note to us, IBM staffers expressed concern that readers of the summary might peruse that section and question Big Blue’s commitment to employment and innovation in Massachusetts.

Curious about the scope of this apparent spat between one of the Commonwealth’s leading economic development agencies and one of its largest technology employers, I called up both organizations. In the end, it seems, everybody’s still friends: the Massachusetts Technology Collaborative didn’t mean to imply that IBM’s global expansion is hurting the state, and IBM isn’t feeling irreparably wounded by the report’s language. But the whole conversation is an interesting case study in the politics of economic development in Massachusetts, and in large U.S. companies’ sensitivities to even indirect suggestions that they’re shipping jobs overseas.

Here’s what the report’s executive summary actually says about IBM: “The rules of the game for research and development investment, market access, and competition in and among states, regions, and countries are in flux…Evidence of these sea changes abound….IT services and hardware giant IBM counts more than 50,000 employees in Bangalore (the greatest concentration of employees outside the US) and went so far as to hold its annual investors conference there in 2007, an event historically and exclusively held in New York.”

I talked yesterday with Mohamad Ali, IBM vice president for business development and strategy, who said he was “a little bit surprised” by that wording. He pointed out that over 5,000 of IBM’s 250,000 employees worldwide are in Massachusetts, making it one of the state’s 20 largest employers; in fact, the new campus it’s building in Littleton and Westford will be the largest IBM software development lab anywhere in the world. “I think you’re seeing our non-U.S. employee population increasing, but you’re also seeing our U.S. population increasing,” Ali says.

“Yes, the reality is that the world is becoming a more competitive place, but I don’t think we are looking to abandon our core position here at all,” Ali continues. “IBM is an American company. We are based in New York and we have a large presence in Massachusetts, and we expect to continue to grow that. The reality is that there are substantial intellectual assets here and we continue to leverage that, and I don’t think the fact that we also have grown our India and China operations means that there is a tidal wave of offshoring.”

Next I called the Collaborative and ended up speaking with Mike Tavilla, the organization’s program manager for research and analysis and the lead author of the Index (a dense, chart-filled, extremely informative report that the Collaborative has been publishing annually since 1997). “We are keenly aware that IBM is hiring people here and consolidating their software labs in the state,” Tavilla says. “We don’t mean to nominate IBM or any other company as a poster child for offshoring. What we are trying to show is that it’s now a condition of global business that activity is growing overseas.”

In fact, the term “offshoring” has acquired an unfairly negative connotation, Tavilla argues. “It’s a common mistake that offshoring is automatically perceived to be a net loss for Massachusetts and for the U.S.,” he says. “There is nothing to document that. In fact, I think it’s a good thing that companies such as IBM can take advantage of what other regions have to offer, be it work forces or raw materials or whatever they need to conduct their business more efficiently. If they can then reinvest those efficiencies back into Massachusetts, that’s clearly a good thing.”

To my own eye, it’s a slight stretch to read the Index’s executive summary as explicitly taking IBM to task for moving U.S. jobs offshore. On the other hand, the statistics about IBM’s hiring in India are part of a passage about the challenges of globalization whose tone might fairly be characterized as defensive or alarmist. Either way, it’s clear that IBM wants the local community to understand that it’s here in Massachusetts for the long haul. And it’s equally clear that Tavilla and the Massachusetts Technology Collaborative think it’s important for the Commonwealth to stay engaged in the global economy.

The advisory board overseeing the production of this year’s Index actually included one representative of IBM, corporate community relations manager Maura Banta. But the board wasn’t asked to sign off on the report’s final language, according to Karen Lilla, a spokeperson for the global communications department of IBM’s Software Group.

“I don’t want you to think that IBM is feeling slighted,” Lilla told me by phone yesterday. “I just wanted you to understand that while IBM is a global enterprise, we do have these strong ties to Massachusetts.”

Wade Roush is Chief Correspondent and Editor At Large at Xconomy. You can subscribe to his Google Group or e-mail him at wroush@xconomy.com. Follow @wroush

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  • Tom Watson

    If readers would like to see what IBM employees are saying about job cuts and other things go to http://www.allianceibm.org
    job cuts comment section

  • Mass Employee

    IBM spokespeople can spin this all they want. Ask any IBM employee what is really going on. They have been moving work to the BRIC countries(Brazil, Russia, India, China and now Argentina too) at a furious pace. Last month they gave 15% paycuts to over 7500 U.S. employees. IBM has been quietly laying off U.S. and Canadian employees for years and shifting the workload to BRIC or replacing them with contractors. Contractors are regularly forced to take paycuts and most employees haven’t seen a pay raise in years regardless of how good their annual review. IBM has reported record profits year after year and shared none of it with the employees. You will see a large exodus from this company without a conscience as soon as the job market turns around!!

  • IBM grunt

    Let’s just find out what kind of jobs are going to remain in Massachusetts (as well as the other states where IBM has a presence). You got it. Upper management…. everything else will be outsourced. IBM’s spokespeople are telling only one side of the story…. the masses won’t be part of the plan to keep jobs in the U.S.

    Readers of the economic report have every reason to “question Big Blue’s commitment to employment and innovation in Massachusetts”. IBM’s track record recently indicates that the only commitment they have is to line the pocketbooks of the CEO and his cronies; to h*ll with the people (the grunt employees) that actually made IBM great in the first place. Real people in the US won’t be able to get a technical job in IBM any more, even those with computer or engineering degrees. In fact, the 15% pay cut is being used to get some of those people so angry that they quit … gosh, the position has to be filled, let’s fill it with a BRIC resource.

  • http://H1-B Jim

    If it isn’t outsourcing, they’ll finally push through getting rid of the H1-B Visa cap.
    I spoke to a recruiter trying to hire me temporarily at Cognizant. He said they had 20,000 consultants waiting to get in but couldn’t because of H1-B limits. Their only purpose is to work for low wages(by US standards, fine for India) and outsource the work, not immigrate or work for any length of time here. If they take the limit off of H1-B’s the jobs will be gone.

    It’s amazing how we’ll use tarrifs to protect other industries like auto manufacturing, furniture, or shrimp farming, but when it comes to protecting any high tech jobs, no one cares. Actually it’s very straight forward, there isn’t a strong IT worker lobby. This country works on political bribery.

  • Long-Time IBMer

    While IBM may retain a specialized segment of skills in some states strategically, overall there is a push for decreasing Americans, Canadians, Europeans where possible, and for increasing labor in the BRICs, as well as Viet Nam. In some divisions the push is more thought out, while in others (Services) it has been a blood-bath, in the US at least – “Lean” out jobs, cut pensions, benefits, no raises, pay cuts… only to non-Executives. For internal job postings that may exist, displaced workers are somehow not hired to fill them. It’s sad. There continues to be a large brain-drain and an overall miserable atmosphere internally.

  • concerned for the US

    The executive spin on this story is just that… spin. Without credibility and without truth.

    As someone directly involved in the research of this topic on behalf of cross line of business IBM leadership, and as a member of a team being affected negatively by outsourcing (yes – IBM Market Intelligence/Market Analysis/Secondary Research support is now conducted in large part in India and other low-cost countries) I can assure you all of a few things.

    Outsourcing of US jobs is happening, and it is accelerating at IBM and at most of our clients as well(who we’re giving advice to).

    Managers have been told that you’re either “with us” or “against us” via members of the LEAN program (one noteworthy IBM program which targets onshore positions to be cut or replaced with offshore positions). Managers who don’t immediately jump onboard with the use of offshore personnel are for the most part replaced by others.

    It’s a sad state of affairs bolstered by the fact that Corporate Executives are generally incented upon profit… and one of the best ways to increase profit is through elimination of jobs or hiring offshore employees willing to work at 10-30% of what an onshore employee is willing to.

  • Me

    Add that IBM is pushing to hire NEW COLLEGE GRADS for any American held jobs which is displacing more senior employees. New graduates, like H-1bs and off shoreds are cheap labor. The experienced ones are thrown away.

  • OldBigBluer

    150 jobs are going bye-bye at East Fishkill and Poughkeepsie in neighboring New York: http://stockmarketcrash08.com/?p=92

  • joe

    I am an IBM employee, have been for more than 20 years. IBM continues to send work from the U.S. to India, Brazil and Argentina at record pace. They even force the U.S. employees to train their offshore replacements. Then shortly thereafter, the U.S. employees are ‘resource actioned’. Translation: they are laid off. Call it what you may, but it has become apparent that IBM wants as few U.S. workers on the payroll as possible. That is the clear view from the inside of IBM and anything else you may see or hear from IBM upper management is nothing more than media spin.

  • http://none.. Paul

    RA’d by IBM in June 2007, and we trained and prepared documentation for and handed off the work to offshore server admin teams in Argentina, Brazil and India. (Account was Panasonic America). Now if that is not sending MY JOB OFFSHORE, have no idea what you would call it. Oh yes, IBM also just cut technical support workers pay by 15% across the board in the US. Good old IBM who made their fortune and their name in AMERICA…

  • Doug

    When our company outsourced us to IBM IBM held a meeting with us and fed all kinds of garbage. I was warned by someone that IBM only keeps people they acquire in a outsourcing deal for 2 years then they start kicking them out the door. That came true for me. I’ve heard my duties were shipped off to India. Anyway how can you trust a company who is behind the RFID chip and before you know it they will be trying to force us all the take the chip. The people that I know that are still with the company absolutely despise it but what are you going to do? You need a job.

  • Jonah

    IBM IS outsourcing at a fast pace. DON’T believe IBM executives. I don’t know how they live with themselves. The quality of work in the BRIC countries is unacceptable to most American customers. Don’t be surprised when you see that IBM has moved it’s headquarters to Banglore.

  • Retired98

    IBM upper management and the lower wanna be upper level actually have no heart and are in it to climb the corporate ladder. These people were put in these positions to do exactly what is now happening. The lower workers are just a number to be adjusted to improve profit, thus fattening some managers paychecks. I have yet to here anything from IBM that leads to any belief there is one ounce of concern for any of the employees affected by layoffs for what ever reason.

    One thing that will not happen is the layoff of inept managers that do nothing more than take up space and figure out how to keep their jobs.

  • John J

    WAKE UP CORPORATE AMERICA!!! It is time to get organized and start a union. Not only an IBM union, but a corporate union. You have seen it many times before, one corporation cuts salaries and benefits, then the other corporations will follow. This is not new news, it has been happening for many years. Get off your butts and join forces. Stop letting upper management say there is no money for raises, and then give them selves at least 10% increases year after year. I propose that if one corporation does something like reduce salaries and cuts benefits, you all band together as a corporate union member and say, we will not take this any longer, due to your cuts we are all taking Fridays off until you fix the cuts. If this doesn’t work take Friday and Monday off. You may say you are too afraid to be so bold. You cannot do this because you will get fired, well face the facts, your jobs are all but gone already. Take it from a one and two performer for 23 years with IBM, that will be the best thing to happen to you in the past 5 years. Try to return the favor to the corporate machine, take the time off so they can feel some of the pain, pain they are dishing out to the hard corporate workers. Again I say, WAKE UP CORPORATE AMERICA!!!