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12/18/2003

Outsourcing here to stay

By Tony Kindelspire
The Daily Times-Call

DENVER — One of the most contentious topics in the business community is the overseas outsourcing of jobs.

In fact, on the morning of a scheduled panel discussion on the topic this week, the Wall Street Journal reported that it had obtained documents indicating IBM intends to ship as many as 5,000 programming jobs to India, China and other countries.

The company has since declined to comment on the report, but just a few hours after the story broke, there was an IBM executive participating in a panel discussion entitled, “High-tech, low luck? Has outsourcing ended the way of high-tech prosperity?”

“It’s an important part of IBM’s overall strategy — to develop business in other countries,” said Gil Saenz, IBM’s vice president of worldwide software delivery and fulfillment, during a breakout session that was part of the 39th annual Business Economic Outlook forum sponsored by the University of Colorado’s Leeds School of Business. Saenz pointed to how 60 percent of his company’s revenues come from countries outside the United States.

As a sound business strategy, he said, along with selling product in those companies, “You have to put some of your investment back into those countries.”

Another executive stated that outsourcing is much more complex that what the media usually makes it out to be.

“The conventional wisdom about outsourcing, I think, is, its goal is to replace jobs here with lower-paying jobs elsewhere,” said PeopleSoft’s Les Wyatt, a former JD Edwards executive who joined PeopleSoft when it acquired his company. “If that were it it would be a pretty short conversation.”

PeopleSoft ships its “lower-value, repetitive-volume” tasks overseas, which, Wyatt said, allows the company’s focus here to be on “bigger value” jobs.

“What’s outsourcing about to us? It’s about increasing the value to the customer,” Wyatt said. “Growth and value are what drives profit in business.”

Saenz made no mention of the WSJ report from that morning, but it’s not the first time IBM has been in the news regarding the topic of outsourcing.

“Throughout this recession, IBM has actually been growing, and that growth has been driven by taking outsourcing contracts in,” Saenz said. “There are a lot of mundane programming jobs, and that’s mostly what’s going over there, but it’s not going to stop there.”

Many heads in the room of roughly 75 people nodded throughout the hour-long presentation by the speakers. Outsourcing, love it or hate it, is here to stay.

But during the question-and-answer portion of the program, the obvious question came up: “As an investor, I’ve liked everything I’ve heard, but if I was 18 years old and I was extremely bright, what would you tell me to convince me to go into the software business?”

“For that matter, it doesn’t have to be 18 — what if you’re 45 years old?” said another audience member, raising his hand.

“The fact that jobs are going offshore is not unique to the software industry,” said Wyatt.

Tony Kindelspire can be reached at 303-776-2244, Ext. 291, or by e-mail at tkindelspire@times-call.com.