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Associated PressAs Big Blue prepares to exploit low wages and fast networks in Asia, other firms are pulling jobs from overseas.
IBM Corp. plans to move as many as several thousand skilled software jobs from the United States to India, China and other countries, which could amount to one of the biggest such actions yet in the technology industry.
IBM documents obtained by the Wall Street Journal said about 4,700 programming jobs could be shifted overseas to save costs, a growing high-tech industry trend known as "offshoring."
More than 900 people are to be told of the move in the first half of 2004, while 3,700 more jobs have been identified as having the "potential to move offshore," the Journal said. IBM already has hired 500 engineers in India to take on some of the work that will be moved, the Journal reported.
The division affected is IBM's Application Management Services group, part of Big Blue's huge technology services division. The IBM facilities where workers could be replaced include offices in Dallas, Southbury, Conn., Poughkeepsie, N.Y., Raleigh, N.C., and Boulder, Colo.
IBM spokesman James Sciales said he would not comment on "internal presentations" but noted that most of IBM's work force, which now totals 315,000, has been overseas for years. Sciales also released a statement saying IBM expects hiring in the United States next year to match or exceed 2003 levels.
While companies long ago began moving manufacturing jobs and other blue-collar work to Asia, big business is now increasingly shifting skilled work there as well. According to International Data Corp., foreign workers performed about 5 percent of information technology services for American companies this year, but by 2007, that share will grow to 23 percent.
Often, the American workers being replaced are called upon to train their overseas replacements. The same will be expected of IBM employees whose jobs are being transferred, according to the Journal.
In a speech this fall, IBM chief Sam Palmisano defended the practice of going to Asian countries for skilled labor, saying those nations not only offer lower wages but also have invested heavily in education and modern communications networks.
He said the United States should respond with increased investments of its own to remain innovative.
"China, India, South Korea and other rapidly developing nations are replicating the structural advantages that historically have made the U.S. the center of innovation," Palmisano told the Council on Competitiveness in Washington on Oct. 30.
"We can't - shouldn't - regret improvements in other nations' competitiveness. Their people deserve to participate fully in the benefits of innovations."
But there have been signs of a backlash in recent months caused by political sensitivities and concerns about the quality of offshore work.
The New York financial-services firm Lehman Brothers hired two Indian firms - Tata Consultancy Services and Wipro Ltd. - last year to manage some of its information technology operations.
About six weeks ago, however, Lehman stopped outsourcing its IT help desk, which handles employee reports of computer problems, to Wipro. Lehman wasn't satisfied with the level of service, according to people familiar with the matter.
Computermaker Dell Inc. said last month it stopped routing calls from corporate customers to its call center in India after receiving complaints about the quality of service. The calls are now being taken by customer service centers in Idaho and Tennessee, Dell spokesman Jon Weisblatt said at the time.
And last month Indiana's state government canceled a $15-million IT contract with Tata after officials concluded it was inappropriate to use taxpayers' money to pay foreign workers. Politicians in other states have proposed bans on awarding contracts to firms that use foreign workers.
Gary Cotshott, Dell vice president for its services division, said, "We felt a little noise and angst from our customers, and we decided to make some changes." Some customers have complained that they can't understand Indian workers because of their accents and that tech support workers rely too heavily on scripted answers.
"Sometimes, we move a little too far, too fast," Cotshott said. Dell was among the first large U.S. companies to move tech support jobs to cheaper call centers in India when technology spending plummeted three years ago.
Lehman spokeswoman Kerrie Cohen confirmed that the firm has brought the help desk function back in-house. Lehman's top IT executives disclosed some details of the change last month on a conference call with Louis Miscioscia, a Lehman IT-services analyst, and with Lehman clients. The conference call was held to discuss trends in technology spending.
"In terms of help desk, Indian firms could not provide the level of quality and services Lehman needs," Miscioscia wrote in a research note Nov. 28.
A Wipro spokeswoman declined to comment.
Lehman Brothers continues to outsource other IT functions, including software application development, applications support and some IT infrastructure support, Miscioscia said.
Lehman, which uses about 450 workers at Tata and Wipro, has generated savings of about 40 percent to 50 percent, Miscioscia said.