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

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 a contributing editor at Xconomy. Follow @wroush

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