IBM's plans to move up to 4,730 programming jobs from the U.S. to India, China and other countries are now out of the bag, but some analysts don't think Big Blue's move will be used as a bellwether by other firms making offshoring decisions.
IBM's offshoring plans concern programmers in the firm's Global Services division, according to a report published in a mid-December online edition of the Wall Street Journal. The affected employees work at sites around the U.S., including Southbury, Conn.; Poughkeepsie, N.Y.; Raleigh, N.C.; Boulder, Colo., and Dallas, according to the report.
IBM plans to inform 947 U.S. employees that their work will be moving overseas, according to the report, which cited internal company documents. A further 3,700 U.S. jobs have been identified as having the "potential to move offshore," the report said.
The 947 workers will be informed of the changes in the first half of this year, some by as early as the end of January, and will be asked to train their replacement, a worker from overseas. They will have 60 days to find another job within IBM, the report said.
Despite Big Blue's traditionally cautious image, "for the most part all of its major rivals are moving in a fairly large way, setting up a greater presence in India," said Jim Westcott, services analyst at IDC Canada Ltd. in Toronto. "IBM is not really lagging behind, it's not leading the charge either, but it's moving along in step" with other vendors and service providers like EDS, Accenture and HP.
He added that most of these large IT services companies recognize that India is still at the forefront of providing offshore service, and with all of the competition offshoring to India, there's more of a move to attract skilled resources overseas - either new graduates or employees already working in other countries. "It's competition for the cream of the crop."
There are some smaller Canadian vendors with some presence in the U.S. that are building low-cost development and maintenance centres offshore, said Westcott. One of them is Calgary-based RIS Resource Information Systems Inc., a nearshore services provider that has set up IT application development offices in Bucharest, Romania.
But from an end-user perspective, Canada hasn't seen a lot of activity in terms of moving IT services projects offshore. "Most can companies, when they're looking to do outsourcing of an IT services project, are primarily looking still locally at a Canadian-based company."
If the customer feels comfortable with the idea, the service provider might suggest the option of moving some of the customer's projects offshore, citing lower costs and a higher standard of work. "But that's at very early stage in Canada," Westcott said.
Alan Pelz-Sharpe, vice-president of software and services for North America at analyst firm Ovum in Boston, also said he's not so sure other companies will follow IBM.
"IT companies have been outsourcing for long time," he said, adding that he thinks it's the numbers which took people aback. "Oracle outsources a heck of lot of stuff, as well as Computer Associates, and even down to very small vendors, they outsource a lot of coding work. In the IT sector this is pretty pervasive...they've been doing it since the crash in IT."