Heavyweights tip scales for offshore outsourcing

The news last week that IBM might outsource some U.S. white-collar jobs overseas has thrown fuel on a smoldering fire.

While IBM contends it has no formal plans to shift jobs, an employee activist organization leaked to The New York Times a recording of a conference call among IBM executives discussing just that.

The Washington Alliance of Technology Workers in Seattle passed the recording to the newspaper and to Alliance at IBM, an Endicott, N.Y., activist organization of current and former IBM employees. While IBM denied any plans, the Washington Alliance says the recording has Tom Lynch, IBM's global employee relations director, saying shifting jobs would raise concerns among government officials worried about the lagging U.S. economy and out-of-work IT professionals.

To continue reading, register here and become an Insider. You'll get free access to premium content from CIO, Computerworld, CSO, InfoWorld, and Network World. See more Insider content or sign in.

The news last week that IBM might outsource some U.S. white-collar jobs overseas has thrown fuel on a smoldering fire.

While IBM contends it has no formal plans to shift jobs, an employee activist organization leaked to The New York Times a recording of a conference call among IBM executives discussing just that.

The Washington Alliance of Technology Workers in Seattle passed the recording to the newspaper and to Alliance at IBM, an Endicott, N.Y., activist organization of current and former IBM employees. While IBM denied any plans, the Washington Alliance says the recording has Tom Lynch, IBM's global employee relations director, saying shifting jobs would raise concerns among government officials worried about the lagging U.S. economy and out-of-work IT professionals.

"Some of the reaction to this is hype, but there is a move toward doing more offshore outsourcing," says Carrie Lewis, a senior analyst in technology management strategies at The Yankee Group. She says that offshore companies expanding their service offerings, along with the reduced cost outsourcing represents, could have more companies moving positions outside of their core business competencies to overseas locations.

Microsoft and HP also recently moved IT positions to operations in India. The Washington Alliance reported in November that Bill Gates said Microsoft would invest $400 million over the next three years to expand its activities in India, $100 million of which would go to its facility in Hyderabad. And HP shifted 1,200 Compaq customer service jobs from Florida to the existing HP center in India.

So even though the IBM discussion is in keeping with industry trends, the news could represent something of a tipping point and lead to an IT employment backlash, says William Martorelli, vice president at Giga Research.

"People seem to have taken this IBM story as a key signal that things have really changed," he says. "It does mark a structural change within a company, and it's more likely a permanent change for companies looking to up their competitive advantage."

Click to see: Job flight

The Information Technology Association of America in May reported the results of a survey that showed 22% of respondents have moved work offshore and 15% have opened operations overseas.

Forrester Research estimates about 3.3 million U.S. services jobs, or about $136 billion in wages, will be located in countries such as India, Russia, China and the Philippines by 2015, with the IT industry leading the mass offshore exodus.

Traditionally, the type of jobs sent overseas didn't threaten the U.S. high-tech employees, but Yankee's Lewis says offshore companies are expanding their service offerings to try to cash in on more outsourcing opportunities from the U.S. While it will take at least two to three years before foreign companies can equal the outsourcing services available in U.S. today, the threat of losing more IT jobs still exists.

"As the offshore companies try to move upstream and add deeper services, they could potentially begin to move into higher-skilled positions," Lewis says.

IDG News Service Correspondent Stacy Cowley contributed to this story.

Read more about lans & wans in Network World's LANs & WANs section.