IBM Data Give Rare Look at Sensitive 'Offshoring' Plans
January 19, 2004: 12:53 a.m. EST
In a rare look at the numbers and verbal nuances a big U.S. company chews over when moving jobs abroad, internal documents from International Business Machines Corp. (IBM) show that it expects to save $168 million annually starting in 2006 by shifting several thousand high-paying programming jobs overseas, Monday's Wall Street Journal reported.
Among other things, the documents indicate that for internal IBM accounting purposes, a programmer in China with three to five years experience would cost about $12.50 an hour, including salary and benefits. A person familiar with IBM's internal billing rates says that's less than one-fourth of the $56-an-hour cost of a comparable U.S. employee, which also includes salary and benefits.
According to the documents, which also provide managers with detailed advice on how to talk about the moves and their effect, IBM plans to shift the jobs from various U.S. locations to China, India and Brazil, where wages for skilled programmers are substantially lower.
At IBM headquarters in Armonk, N.Y., a spokesman said that the company expects to shift 3,000 U.S. jobs overseas this year. He declined to comment on plans for next year. He said IBM expects to add 15,000 jobs world-wide this year, with a net total of 5,000 of them in the U.S. That would increase IBM's world-wide employment to 330,000, the highest level since 1991.
IBM hasn't announced the plan to shift workers overseas -- elements of which were reported in The Wall Street Journal last month -- either internally or externally. It isn't clear if the documents are final versions; most carry dates of late November and December 2003. The spokesman declined to comment on the documents seen by the Journal.
Like other high-tech companies, IBM is moving knowledge work to cheap-labor sites outside the U.S. This "offshoring" process has raised fears that even high-skill jobs that were supposed to represent the U.S.'s future are being lost to countries that have already taken over low-skill factory work.
Wall Street Journal Staff Reporter William M. Bulkeley contributed to this report.
Dow Jones Newswires 01-19-04 0053ET Copyright (C) 2004 Dow Jones & Company, Inc. All Rights Reserved.