In-Depth

Outsourcing: IBM May be Planning Large Expansion in India

Big Blue might have plans to hire at least 14,000 additional workers this year—in India

• By Stephen Swoyer
• 06/28/2005

Last month, IBM Corp. announced massive job cuts in Europe—totaling perhaps as many as 13,000 workers. But Big Blue might have plans to hire at least 14,000 additional workers this year—in India.

That’s according to an internal IBM memo obtained last week by the Washington Alliance of Technology Workers (WashTech), an advocacy organization for IT professionals. WashTech leaked the memo to The New York Times, which published an account of Big Blue’s plans last week.

WashTech sourced the memo to an IBM employee who had concerns about the company’s offshore outsourcing plans.

The massive job cuts Big Blue disclosed last month were expected. In April, CFO Michael Loughridge confirmed that IBM would announce a restructuring sometime during the second quarter. Then, last month, IBM said the job cuts would help shift employees into more direct client relationship roles and eliminate the “traditional pan-European management layer” that affected its ability to coordinate activities across countries’ borders.

IBM officials, for the record, declined to confirm or deny the contents of the memo. Although a desire to cut costs is often fingered as an impetus for outsourcing moves, IBM senior vice-president Robert W. Moffat told The New York Times that projected cost savings aren’t the only reason companies are outsourcing IT tasks and services to India and other points offshore.

“People who say this is simply labor arbitrage don't get it,” Moffat told the Times. “It's mostly about skills.”

According to WashTech, as many as 24,478 U.S. tech jobs were sent offshore last month, while an additional 7,754 U.S. workers were laid off. The advocacy group says both numbers have been increasing each month—along with the number of new companies taking the offshore plunge.

“This leaves no question that offshore outsourcing is spreading rapidly at increasing rates among U.S. companies,” Marjan Foruzani, who tracks the offshore movement of jobs for WashTech. “IBM, as an example, increased its Indian workforce by 150 percent in one year. By the end of 2003 the company employed 9,000 workers in India and by the end of 2004 grew to employ 23,000 workers in Bangalore, Pune, Gurgaon and Calcutta. This growth has been facilitated by the fact that offshore outsourcing is not only becoming increasingly accepted, but now it is even celebrated.”

Foruzani, for the record, has said he gets his numbers by tracking “offshore events” (usually submitted by laid-off workers, or by others sympathetic to WashTech’s perspective), which he then corroborates by consulting “independent media resources.” Because of this approach, Foruzani concedes, WashTech’s “offshore tracker” total is probably a conservative one, as he can only corroborate about one-quarter of the tips he receives—for the simple reason that most of them still aren’t yet public knowledge.