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    Highlights for week ending May 31, 2003
  • An important Town Hall meeting with Congressmen John Tierney (MA), Bernie Sanders (VT), Tom Allen (Me), and Barney Frank (MA) will be held in Boston's historic Faneuil Hall on Monday June 16 at 1pm concerning pension and retirement medical. Please circulate widely. Please let Jimmy Leas know if you plan to attend.

  • CNET News: Outsourcing guides see green offshore. Excerpt: The economy remains in a slump, and that's exactly why Atul Vashistha is smiling. As CEO of NeoIT, a consulting firm that helps companies outsource some operations overseas, Vashistha has little trouble these days pitching the value of his company's services. Last year, San Ramon, Calif.-based NeoIT played a part in the signing of offshore outsourcing contracts worth more than $250 million--of which it received a cut. In the first three months of this year, it worked on deals totaling more than $300 million. "We believe every company can (outsource) offshore," said Vashistha. "The question is, how much should you do?" ... Forrester has estimated that the number of computer jobs moving overseas will grow from 27,171 in 2000 to a cumulative total of 472,632 by 2015. Forrester analysts predict that other services--including call center services and back-office accounting--will follow information technology operations abroad.

  • Midrange Server: Rant: Offshoring in the Offing. Excerpt: Offshoring, which has been all the rage in the financial services industry for years, is arguably the biggest threat to indigenous IT careers in America and Europe, and it is going to make a lot of people crazy. This is going to make the H1-B visa issue in the United States look like a practice run, which it was. ... There is hardly a week that goes by when one of the big IT players like Microsoft, Intel, IBM, Dell, Sun Microsystems, Hewlett-Packard, and Cisco doesn't announce that they are setting up a hardware or software engineering center in a popular offshoring region. ...

    All I know for sure is that my first cardinal rule for capitalism is that those who can employ must employ. This is a very profound responsibility, and speaking from personal experience, it is a responsibility that cannot be borne lightly. Employing is a heavy burden. But employment is the very foundation of a democratic, capitalistic society. Keeping people working is what industry should be about. I believe in hard work, being smart, global marketing, and making profits, but not to the detriment of the society I live in or the one that ends up being nothing more than an exploited colony. The executives of the Fortune 500 and the Global 2000, who have fattened their bank accounts in the past two decades while sacrificing tens of millions of employees to oblivion rather than take a longer view toward redeploying those workers, should be ashamed. If the CEOs had sacrificed, too, then maybe all of those firings, many of which were probably necessary, would have been more palatable. But that didn't happen. Even Sun Microsystems, which has been bucking Wall Street by saying it would work through the IT downturn by firing as few people as possible is one of the worst offenders in the use of H1-B and offshore workers.

  • iSeries Network: The Disposable IT Worker, Part I: H-1B May Take a Back Seat to the L-1 Visa in Displacing U.S. Workers. Excerpts: But anger over the H-1B visa issue is not likely to die off so quickly. Former IBMer Janet Krueger, an independent consultant and worker advocate, notes that “there were older IBM workers being laid off while H-1B visa workers were being hired.” According to Jim Mangi, secretary of The Alliance at IBM and an IBM IT specialist, “IBM laid off 15,000 people last year, but they were hiring H-1B visa people. They don’t even have to post the job because IBM isn’t ‘H-1B dependent’. They can go out and offer the job to anyone.” ... One iSeries worker, who asked not to be identified for fear of reprisals from his company, says that in one of the shops he’d worked in, there were 11 employees — five of whom were in the U.S. on H-1B visas. “When there was an opening, they’d put a ‘blind’ ad in the newspaper,” he says. “They intentionally made the job sound awful. When resumes came in, they would literally toss any that were good, and would save the ones from people who were not qualified and from foreigners. That’s the ‘documentation’ they would use to defend their stance that they were unable to fill the position with U.S. workers.” ... Larry Margrabe, an iSeries senior programmer at a Midwest manufacturing company, believes that “it’s time to bring this to an end. If there ever was a shortage, there certainly isn’t one now. Ten percent of the people in IT have gone into other positions -- but many of them have gone into downsized positions. Why in the world are we still subsidizing workers from other countries?” If link is broken, view Adobe Acrobat version [PDF--45 KB].

  • Computerworld: Bill in Congress would curb L-1 visa use for foreign workers. A congressman calls the L-1 a "back door to cheap labor." Excerpts: The L-1 visa enables companies with subsidiaries abroad to transfer to the U.S. from other companies executives or workers with specialized skills. But critics contend that foreign outsourcing firms use it to import lower-paid workers who then replace higher-paid U.S. employees. ... According to Mica, there are currently more than 325,000 L-1 visa holders in the U.S. H-1B visas allows foreign workers to take jobs in the U.S. for as long as six years. Someone with an L-1 visa can work in the U.S. for up to seven years.

  • TechsUnite.org: Rep. Inslee says U.S. won’t stem outsourcing. Despite appeals from many of his constituents to help stem the flow of high-tech jobs to countries like India, U.S. Rep. Jay Inslee (D-WA) of Washington state is in New Delhi this week, where he assured Indian government officials and business executives that any measures currently before state legislatures or the U.S. Congress which aim to curb offshore outsourcing are likely to fail. ... Inslee said he traveled to India this week to promote trade opportunities for his state’s businesses, namely Boeing and Microsoft. He was also scheduled to be the keynote speaker at the Third Annual Baramati Initiative on Information Computer Technology and Development. During a telephone interview from New Delhi Friday, Inslee said that his trip was paid for by Digital Partners, a group that describes itself as a Seattle-based non-profit institute with chapters in the United States and India. Many of the group’s leaders are past or current Microsoft employees who are from India. ...

    Inslee represents Washington State's 1st congressional district and is a member of the Democratic Advisory Group on high-tech issues. Much of his district comprises King and Snohomish counties, home to huge multinational companies such as Microsoft Corp. and Boeing Co. But since 2001, the district has been plagued by the economic downturn and massive aerospace and tech industry layoffs. State economists say that within the past two years more than 80,000 jobs have been lost in King and Snohomish counties alone. Many of those jobs have been lost to offshore outsourcing. ... “Companies like Boeing and Microsoft receive significant state and local tax breaks that are explicitly intended to stimulate economic development and job creation in Washington state,” said Mike Blain, a past president and current editor-in-chief for the Washington Alliance of Technology Workers, or WashTech, in Seattle. "But now many companies are taking these tax breaks – really public subsidies from taxpayers -- and then offshoring as much work as possible."

    During the 2002 elections, Inslee received more high-tech money in campaign contributions than any other member of Congress, according to opensecrets.org, a Web site that tracks campaign contributions in U.S. elections. Most of the contributions -- $82,100 – came from the Microsoft Corporation Political Action Committee, or individual Microsoft employees.

  • Workforce: Despite bad press, cash balance plans are experiencing a renaissance. Many companies are thinking about converting. FedEx and Delta are already there. Excerpts: Infuriated IBM employees are still fuming over the company’s May 1999 conversion from a traditional pension plan to a cash balance plan. Kathi Cooper, a business controls adviser, was so incensed that she filed a federal lawsuit alleging age discrimination. "They reduced our benefits to give them to the younger workers--that’s age discrimination," she says. Janet Krueger, who left IBM after the conversion, thought she could retire with a comfortable pension, but her plans evaporated after she saw her opening account balance in the cash balance plan. "It doesn’t take a rocket scientist to figure out that an account balance equal to less than one year’s salary would not translate into an annuity equal to one-third my salary in 8 to 10 years," Krueger says. ...

    After IBM announced its conversion, thousands of IBM workers flooded the media and Congress with stories of promised benefits that were being stripped away. The computer giant got a reputation as the poster-child for bad cash balance conversions, says David Certner, director of federal affairs for AARP in Washington, D.C. IBM won’t comment on the incident.

  • Business Week: Shareholders Unite to Expense Options. Investors are mounting spirited campaigns to make tech companies cost out their options. Congress and regulators should pay attention. Excerpt: With little fanfare in recent weeks, shareholders in favor of including options as an expense on corporate income statements have won majority votes at two dozen companies, and significant minority votes at many more. Even at tech outfits, including Intel (INTC ), Veritas Software (VRTS ), and Apple Computer (AAPL ) -- which remain steadfastly opposed to expensing -- shareholder revolts over expensing options have succeeded or almost succeeded. Even at Intel, and despite a company campaign to convince shareholders to reject the proposal, supporters of expensing came very close to prevailing.

  • Wall Street Journal: FASB Rule Shift Could Increase Companies' Pension-Plan Costs. Excerpts: ...under a proposed change backed by staff at the Financial Accounting Standards Board, employers offering certain cash-balance plans would change the way they calculate their obligations to workers. Under the change, employers would use the same interest rate they use for crediting employees' accounts -- typically the yield on various government securities -- to calculate this obligation in present-day terms. Currently, companies calculate this obligation for all kinds of pension plans using the yield on high-quality corporate bonds. Because the yield on government bonds is typically lower than that of corporate bonds, companies would be using a lower rate to calculate what their future obligations would cost in today's terms; the lower the interest rate, the bigger the liability on their balance sheets. ... Meantime, in Washington, D.C., a retiree-advocacy group is calling for a Labor Department investigation into how companies calculate a different set of pension figures: those used to determine how much money employers must contribute to their plans annually. The National Retiree Legislative Network wants to halt a proposal in Congress that would let companies contribute less to defined-benefit plans of all kinds, including cash-balance plans. Employer groups are backing the change in the face of persistent low interest rates and three years of weak investment returns, the combination of which could force many companies to make contributions to keep pension plans adequately funded.

  • Reuters: FASB to reconsider pension idea under attack. Excerpts: U.S. accounting rulemakers on Wednesday said they would reconsider a proposal on valuing pension obligations that would boost pension liabilities on companies' books and has drawn criticism from corporate America. The Financial Accounting Standards Board, which sets U.S. accounting rules, asked its staff to reexamine the issue, taking into account the feedback it received and the differences in how corporate pension plans are designed. The proposal, put forward by a task force at the board earlier this month, affects companies offering an increasingly popular type of pension called "cash-balance" plans, where employees are promised a lump sum when they retire. ... An IBM spokeswoman said the company is keeping a very close eye on developments at the FASB over this issue.

This week on the Alliance@IBM Site:

  • Time: Where Did My Raise Go? Shrinking paychecks are the new reality for many Americans. How global markets and a weak economy are affecting how we work—and how much we make. Excerpt: Michael Tucker, 49, fumes when he thinks about computer programmers overseas working for $20,000 a year—"and to them, that's good money." He was making $80,000 a year at a programming job in Chapel Hill, N.C., before Temtec USA laid him off last October in a broad cost-cutting move. He has been unable to land a regular paycheck, despite sending resumes to 300 U.S. tech firms. Now, with unemployment benefits running their course, he's trying his hand at commissioned sales for a human-resources company in his hometown. He says he is finished with tech and moans that "computer programmers are the textile workers of the future." ... U.S. technology companies are also sending a great deal of work overseas. They now pay foreign firms $10 billion a year to handle data entry, analysis, customer service and computer programming—saving themselves many multiples of what they would pay if the work were done in the U.S., says Andrew Dailey, partner of JetStream Group, a San Francisco technology consultancy. More software writing is taking place overseas, particularly in India, Dailey says, where the highly educated, English-speaking work force competes on quality as well as cost.

  • San Francisco Chronicle: Overseas tech jobs proliferate. More Silicon Valley companies find cheaper labor in other countries. Excerpt: "Offshore is going mainstream," said Frances Karamouzis, an analyst with Gartner, a Connecticut technology research firm. "Companies are jumping on the bandwagon." In India, the country that is the biggest beneficiary of the offshore technology explosion, sales of software and services to foreign customers have grown from a few million dollars in the early 1990s to $13 billion in the 12 months ended in March, according to India's National Association of Software and Service Companies. Meanwhile, China is making substantial investments in its software industry with an eye to siphoning off some of that business. And, because English is spoken widely there, the Philippines is getting a growing share of the technical support and call center business India has become known for. "Within a few years, half of all Silicon Valley software companies will be maintaining 80 percent of their technical staffs offshore," he said. "The top 20 percent of software technicians will continue to provide that function based here in the valley, while the other 80 percent who support and maintain software will see their functions exported," he said.

  • New York Daily News editorial by Lou Dobbs: Stop trading U.S. jobs away. Excerpt: We're in a modest economic recovery, one that is still fragile. And this recovery is not creating jobs. I'm far more concerned about the jobless nature of this recovery than the level of interest rates or market levels. Government and corporate policies are sending more jobs, capital and American know-how overseas to produce goods and services more cheaply. The proof is in the numbers: The U.S. account deficit, the broadest measure of transactions with other nations, swelled to $503 billion in 2002. ... Changing the culture won't be easy: The middle class has little representation in Washington, the multinationals have little incentive to produce here at home, and working men and women in this country are watching their paychecks shrink in response to the competition of lower-paid foreign workers.

  • New York Newsday: Tech jobs disappearing in city, going overseas. Excerpt: Thousands of technology jobs in New York, ranging from data entry to software engineering, are being lost to cheaper overseas competitors. The city's largest brokerages banks and insurers are contracting major tech work to providers based mainly in Asia. The process, called offshoring, saves companies up to 70 percent because the cost of the work in China and India is only a fraction of what it is domestically, The Daily News reported in Sunday editions. According to a study by management consulting firm A.T. Kearney, financial services companies are planning to move more than 500,000 jobs overseas in order to reduce operating costs by $30 billion annually.

  • Letter from Linda Guyer, President, Alliance@IBM: The Danger of Offshoring. Excerpt: It's been a "trickle" so far, says Gartner Group. It's very soon going to turn into a "torrent". I'm talking about highly admired jobs going overseas. Jobs that it might take a Master's or PhD to perform. High Tech will be leading the way, with Financial Services very close behind. Microsoft, HP, Intel, and others have already bragged about their use of cheap, overseas programming and enginering talent and how rapidly they plan to expand them. I am not worried merely about our jobs - I am trembling at the prospects for a disastrous effect on the American economy. Already, the US is considered by major economists to be in a jobless recovery. And the layoffs continue. Unlike some of our competitors, IBM been very quiet about this job exodus, even though they clearly have the exact same plans. Sam Palmisano, at this year's stockholder meeting, misleadingly denied any plans to move jobs overseas. But the evidence is all around us and IBM won't be able to keep quiet much longer. Palmisano, Donofrio, Steve Mills (exec VP of Software), and Paul Horn (IBM Research executive) have each visited India in the last month. IGS project managers and sales people are being driven to use overseas resources.

    I believe IBM's strategy is to be very quiet about this. They will never admit they are moving the jobs but will execute the plans in a very quiet fashion, spread out over place and time so they do not call attention to themselves They do not want another uprising as happened in 1999 with the pension scandal. They do not want this to hurt their press image or their US university recruiting. They also do not want employees to band together and put pressure on the company and our government to stop this situation -- which is exactly what we plan to do. Right now, the Alliance is working with Washtech and other unions, the AFL-CIO, and local state and federal government officials to put a stop to this. We are executing our plans. ... The effort, however, will be huge, and we need your help. If you care about your job, your spouse's job, or the American economy, please volunteer. If you have even a few minutes per week to help us in the cause, please contact us immediately. Email me at mrs_adm@yahoo.com. We need all hands on deck for this very serious assault on our livelihood and on our country's economic well-being!

"The test of our progress is not whether we add more to the abundance of those who have too much; it is whether we provide enough for those who have too little." — Franklin D. Roosevelt
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