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Highlights—June 10, 2006
- Associated Press, courtesy of Forbes: IBM:
Firm Will Triple Investment in India. By Rajesh Mahapatra. Excerpts:
IBM Corp. plans to triple its investment in India to $6 billion over the next three years to take advantage of the
country's lower-cost labor and diverse engineering skills for technology services customers around the world.
Palmisano said IBM would increase its work force in India but he did not specify numbers.
In the past three years, the company has invested more than $2 billion in India and increased staff from 9,000
to 43,000, helped by the estimated $150 million acquisition of Indian back-office outsourcing provider Daksh
eServices. Now Big Blue employs more people in India than any other foreign company. And India is IBM's second-largest
base of operations, trailing only the U.S., which has 125,000 of IBM's 330,000 people. [...]
Bob Djurdjevic, an analyst with Annex Research, said he found IBM's presentations intriguing
because they showed the company is not skittish about the topic of offshoring work to India and other developing countries,
a subject that became contentious in the 2004 election. "What IBM is doing is breaking new ground in that sense,
by heralding its operations in India boldly and loudly as a success, not something they should be reticent about," Djurdjevic
- CNN/Money: IBM needs more
than just India. Aggressive moves overseas are applauded but investors say
Big Blue must do more; facing down HP, Accenture and Wipro. By Amanda Cantrell. Excerpts: Concern about growth is
one reason the company's share price has suffered. Shares of IBM are down 3.2 percent this year, compared to a
1.6 percent decline for the Nasdaq, and the shares have been stuck below $100 for the past four years. [...]
Another problem is the company's inability to articulate its strategy clearly, according to
Kim Caughey, an analyst at Fort Pitt Capital Group whose firm owns shares of IBM. Caughey said the company has done
a good job restructuring and reshuffling its assets but not so well on selling itself to investors.
- Raleigh News & Observer: IBM reveals
its ambition in India. Employees in country have increased to
13 percent, while company has laid off in U.S., Europe. By Saritha Rai, the New York Times. Excerpts: The world's
biggest computer services company could not have chosen a more appropriate setting to lay out its strategy for
staying on top. Today, on the expansive grounds of the Bangalore Palace, a colonial-era mansion once inhabited
by a maharajah, the chairman and chief executive of IBM, Samuel J. Palmisano, will address 10,000 Indian employees.
"A significant part of any large project that we do worldwide is today being delivered
out of here," said Shanker Annaswamy, IBM's managing director for India, who presides over what is now the company's
second-largest worldwide operation. [...]
In the last few years, even as the company has laid off thousands of workers in the United
States and Europe, the growth in IBM's work force in India has been remarkable. From 9,000 employees in early
2004, the number has grown to 43,000 (out of 329,000 worldwide), making IBM the country's largest multinational
- Raleigh News & Observer: IBM to invest
billions in India. A research facility and service centers
will be built over three years, CEO says. By Rajesh Mahapatra. Excerpts: Now Big Blue employs more people in India
than any other foreign company. And India is IBM's second-largest base of operations, trailing only the U.S., which
has 125,000 of IBM's 330,000 people. One of IBM's largest employment centers is in Research Triangle Park, where
it has about 11,000 workers.
- BusinessWeek: IBM's
India Pep Rally. There was plenty of Bollywood fanfare -- and the promise of
a $6 billion investment -- as Big Blue held its first analyst meeting on the subcontinent. By Manjeet Kripalani.
Excerpts: It was a cross between a U.S. Presidential visit and a rock concert. IBM's (IBM) first-ever analyst meeting
outside the U.S. was held on June 6 at the Bangalore Palace grounds, a large open area for public events situated
in the heart of India's Silicon Valley, amid tight security and much hoopla.
A large blue air-conditioned tent housed close to 11,000 people -- 10,000 of whom were IBM's
Bangalore employees, and the rest IBM senior management and analysts from across the world. The entire event
was webcast to the company's 330,000 employees worldwide. Inside, New Age Indian guru music blared, big screens
flashed global IBM ads, and dancers from across India performed on stages scattered around the enclosure. Armies of
public relations agents fussed about. In all, it took some 1,500 people to put on this mammoth event.
At exactly 10:15 a.m., as a giant clock on the screen counted down to zero hour, the crowd
roared and IBM Chief Executive Sam Palmisano walked onto the main stage accompanied by Indian President A.P.J. Kalam,
other local dignitaries, and Sunil Mittal, the chief of India's largest cellular operator, which has outsourced its
back-end operations to IBM India.
Palmisano got enthusiastic cheers and applause from his local staff when he talked about how
important IBM's 43,000 employees in India are to the company's growth. That large workforce makes IBM the biggest
tech player in India. "I am here really to say ‘thank you' for all your hard work in getting us to the
No. 1 position," he said. [...]
Palmisano will no doubt take home some wonderful memories from his India trip: the roar of
appreciation he got from thousands of his young employees, the gardens of Bangalore in full monsoon bloom, the charms
of Bollywood actress Dia Mirza who emceed the event in a red sari. IBM's boss certainly seems to have the goodwill
of his Indian employees for now. The challenge will be to parlay that into building IBM's reputation in India as a
great place to work.
- Wall Street Journal: IBM
Decides to Pull Ads From BusinessWeek. By Brian Steinberg. Excerpts: International
Business Machines has decided to move advertising out of McGraw-Hill's BusinessWeek magazine for the foreseeable
future, according to people familiar with the situation. IBM has been one of BusinessWeek's top advertisers in recent
years, according to TNS Media Intelligence, although it had reduced its spending to $9.3 million last year from $14.9
million in 2004. One reason for IBM's move is related to pricing, the people said. BusinessWeek wasn't willing to
give IBM the level of discount sought by the marketer.
- Yahoo! message board post: IBM
sticks it to BusinessWeek - Good! By "ibmaccountant". Excerpts: This
article proves that sucking up to the big blue pig doesn't pay. Newspapers eager to keep their advertising revenues
by misleading the public and investors with unfiltered corporate propaganda beware.
Writers beware - don't give up your reputation for a fistful of dollars and a promise laced
with poisonous fine print.
- New York Times commentary: The
Corner Office in Bangalore. By Lawrence Orlowski and Florian Lengyel.
Excerpts: Costs are rising everywhere for American corporations, from energy to employee health insurance premiums.
Yet in their drive to cut expenses, most notably by moving factories and call centers to other countries, they are
overlooking the escalating cost of the executive suite. It's time to apply market logic to this disturbing trend
and begin outsourcing chief executives. This measure would unlock tremendous value for shareholders.
So far, outsourcing manufacturing and services has led to higher chief executive compensation,
at the expense of shareholder profit. For example, I.B.M.'s chief executive, Samuel J. Palmisano, who has been moving
jobs to India, last year saw his total compensation rise 19 percent to $18.9 million — even as the total return
for his company's stock fell 16 percent.
That's proof that globalization hasn't gone far enough. China, India and other emerging markets
offer shareholders a virtually unlimited talent pool from which to draw chief executives. With an increased supply
of candidates, a truly independent corporate compensation committee would be easily able to hire superior leaders at
salaries and benefits that are a small fraction of what their American counterparts in those fancy corner offices demand.
Several orders of magnitude separate the compensation of American and overseas chief executives;
the Federal Reserve notes that while a typical American chief executive in 2004 got a compensation package 170
times greater than that of the average American workers, in Britain it was 22 times and in Japan 11. [...]
Current chief executive compensation creates what economists term a perverse incentive. An
American chief executive, who is paid an average of $11.3 million annually, gets rewarded enough in one year to exceed
the lifetime standard of living of 99.99 percent of the world's population. Even if he's booted from his job because
of poor performance, he's set for life.
It is far better for shareholders to have chief executives whose compensation packages are
based on the long-term performance of the company. Or in plain language, it is better to have a "hungry" executive
instead of one who stays fat and happy even when the corporate ship capsizes into the troubled waters of bankruptcy.
- The Journal News (Westchester, Rockland and Putnam Counties in New York): Big
Blue showcases India investments. By Julie Moran Alterio. Excerpts: Today, Palmisano writes, companies want to integrate their far-flung
operations with the idea of enhanced productivity. In India, for example, technology companies such as IBM are building
research and development labs and service centers to answer demand from around the world. The trend brings worries
about the fate of jobs in the United States, a fact that IBM acknowledged by posting a Q&A about the event on the
internal company Web site.
In answer to questions about moving jobs to India and expanding the work force there, IBM asserted,
as it has in the past, that the company isn't sending work overseas to save cash. "Globalization is about being
able to tap into the right skills and resources wherever they are around the world," IBM wrote, noting that employees
in India are involved in a spectrum of tasks that includes research, consulting and engineering.
IBM encouraged employees to rejoice in the event, which the company said is the largest forum
of this kind ever presented in India: "It's one of the company's most important events this year, and one that
should instill pride in every IBMer."
That message didn't sit well with Earl Mongeon, who works in an IBM chip factory near Burlington,
Vt. "I was disgusted that they were touting this as a great thing," he said. "Maybe it is if you are
an executive, but what about the American worker?" Mongeon, a 27-year IBMer who supports the idea of starting
a union, said he blames outsourcing for not receiving a raise for three years. "They can depress wages by sending
jobs offshore. Everybody will shut up about raises so they can continue to work," he said. [...]
Bob Djurdjevic, a longtime IBM watcher with Annex Research in Arizona, said the company doesn't
fear touting its India moves today because there's less public criticism of offshoring than in 2004, when the issue
was a point of contention in the presidential election. "Companies are feeling more free about the business merits
of what they're doing," Djurdjevic said. "IBM certainly has a good story to tell."
- The Journal News: IBM's
India moves provoke praise, criticism. By Julie Moran Alterio. Excerpts: Well,
the not-so-secret secret is out. After years of hedging about exactly how many jobs were going to India, IBM Corp.
has boldly declared its head count (43,000) and its investment plans ($6 billion in the next three years). IBM's
big event in Bangalore yesterday was a bit like a coming-out party for the company's India agenda. Never before had
IBM shared so much about its plans to be the top computer company in the high-tech nirvana of India.
Former IBM employee Lee Conrad, coordinator of the Alliance@IBM, a budding union, felt vindicated
by the confirmation that IBM's India work force is bigger than anyone thought. "For a couple of years, we said
30,000 to 40,000 jobs would be offshored, and people were skeptical. Now they are up to 43,000 jobs, up from 9,000
in 2003," Conrad said. "It's not job creation in India, it's job shifting."
- Forbes: IBM chief calls
for MNCs to end 'colonial approach' to foreign ops - report. Excerpts: Sam
Palmisano, head of IBM, called on multinationals to evolve into a new type of corporation if they are to avoid an
anti-globalization backlash that leads to the election of governments hostile to the interests of big business. The
IBM chairman and chief executive wrote in today's Financial Times that traditional multinational companies (MNCs)
need to abandon their approach to operations outside their home country. [...]
The IBM chief's decision to go on the offensive comes less than a week after he announced
plans to invest 6 bln usd in India, highlighting the latest step in the company's efforts to shed its multinational
He said traditional MNCs were designed to deal with the 'protection and nationalism' that
held sway in the 20th century. The modern company, he wrote, is a 'globally integrated enterprise' which spreads its
strategies, production capacity and management around the world in order to be close to markets and customers.
The globally integrated enterprise is an inherently better and more profitable way to organise
business activities -- and it can deliver enormous economic benefits to both developed and developing nations,' he
- Washington Post: Verizon
Bias Suit Deal Sets Record. Pregnancy Case Yields Payout Of $48.9 Million.
By Amy Joyce. Excerpts: Verizon Communications Inc. will pay almost $49 million to 12,326 current and former female
employees as part of a landmark class-action lawsuit alleging pregnancy discrimination. The U.S. Equal Employment
Opportunity Commission reached a settlement in 2002 against Verizon predecessors Nynex Corp. and Bell Atlantic Corp.
But the total amount of the settlement was not made public until yesterday, when the EEOC completed its projections
of how much would be paid in future benefits. [...]
The final figure makes the case the largest pregnancy discrimination settlement in EEOC history.
It covers women in 13 states and the District. Nynex and Bell Atlantic were accused of violating federal law by denying
women pension and other benefit accruals when they spent time on pregnancy or maternity leave.
- Los Angeles Times: Grim
Retirement Awaits Many. Workers are not saving enough to counter cuts
in pension and Social Security, researchers say. By Jonathan Peterson. Excerpts: Almost 1 in 2 American families
is headed toward years of financial struggle in retirement, according to a new report that says workers are unprepared
for cuts in pension and Social Security income. Much of the pain will fall on Generation X, those born between
1965 and 1972, the report said. That's primarily because these younger workers face the prospect of diminished
Social Security income and fewer of them will have pensions. [...]
Companies have abandoned costly traditional pensions, which guarantee monthly income for life,
in favor of contributions to individual 401(k) plans overseen by the employees. In 2004, the typical older worker
nearing retirement had just $60,000 in 401(k) and individual retirement accounts, an amount that would yield
less than $400 per month in retirement, the researchers say. [...]
On the hopeful side, the picture can change significantly if people work longer and save more.
For example, retiring at 67 instead of 65 reduces a household's risk by 11 percentage points, the report found. Saving
more also can help a person's long-term outlook, particularly if the added savings start when a worker is young. At
the same time, a recent report by consulting firm McKinsey & Co. found that 4 in 10 workers were forced to retire
earlier than they intended, usually because of health issues or job loss.
- Reuters: US
companies likely to cap retiree benefits - S&P. By Emily Chasan. Excerpts: U.S. companies
are prepared to respond to changes in accounting for retiree benefits, like health care, by capping them, according
to a report issued by Standard & Poor's on Tuesday. Even though funding for defined benefit pension plans at S&P
500 companies improved slightly in 2005, according to the study, the lack of funding allotted to post-employment
benefits like health insurance was quite stark. [...]
Pension plans have some insurance through the Pension Benefit Guaranty Corp, an independent
agency of the U.S. government, but the same support does not exist for other post-employment benefits. Companies are
required by law to fund their pension plans but are not required to set up separate funds for the other post employment
- Communications Workers of America (CWA): CWA
Reaches Three-Year Agreement with Avaya. Excerpts: The Communications
Workers of America, bargaining with the International Brotherhood of Electrical Workers, has reached a tentative
three-year agreement with Avaya Inc., that achieves workers' key bargaining goals of improving job security and maintaining
quality health care for both active and retired workers, among other gains.
The tentative agreement maintains employer paid health care premiums for both active and
retired workers over the contract term, a critical goal for CWA members and bargainers. The settlement also provides
for a 3 percent wage increase in each contract year, plus a four percent increase in the pension bands effective
July 1, 2006. Other pension improvements include a new lump sum distribution option and additional beneficiary options.
- Jim Hightower: The Ruby Red Cocktail. Excerpts:
Time to take another peek [Lifestyle Theme] into the "Lifestyles
of the Rich ... and Cranky." Most of us rubes and common riff-raff simply have no idea how difficult it is to
be rich. The demands are crushing, because one is always expected to live up to... well, expectations. Take the simple
act of ordering a drink in a bar. You and I would take a stool and say, "gimme a beer," or on special occasions, "I
feel like a nice Chardonnay tonight." If you are Mr. Rich E. Rich, however, you must show more discernment, refinement,
savoir faire, and – how shall I put it? – wealth. Yeah, that's it: wealth.
Luckily, the Reserve Club, a trendy spot in downtown Chicago, has come up with just the
libation for the hoity-toity set to order: the Ruby Red. This is not a concoction made with Ruby Red grapefruit,
as you and I might assume, but a delightful blend of Gray Goose vodka, Hynotiq cognac, Pama pomegranate liqueur,
a splash of Dom Perignon champagne – and, to top it off, a one-carot, grade A ruby. Yes, a real gem of a
You can enjoy a Ruby Red martini for only $950. Per glass.
The club manager, who invented the Ruby Red, says he was trying to come up with something
for the elite clientele that would be more memorable than merely opening yet another bottle of expensive champagne. "We
wanted to use pomegranate because it's hitting a popular trend with the antioxidants," he explained. "Dom
Perignon champagne added a certain 'je ne sais quoi,' while using the Gray Goose vodka brought a smooth and silky
twittered. And, of course, the ruby brought the "wow" factor into play – as well as bringing the
- Jim Hightower: Bad Medicine for Nurses. Excerpts: While senators loudly brag that they're building
a big wall on the Mexican border to keep out immigrants – they've very quietly bored a gaping loophole in the
law to let hundreds of thousands of low-income foreign workers enter our country and take some of our most essential
A little-known provision pushed by the giant hospital chains will throw open our borders to
foreign nurses, allowing the hospital industry to recruit low-paid trained nurses from the Philippines, India, China,
and Africa. These foreign nurses make under $2,000 a year back home and can easily be lured here to take less than
the going rate of American professionals.
Already, some 14,000 nurses from abroad are given work visas to enter the U.S. each year, but
the senate bill, carried by Kansas Republican Sam Brownback, simply removes the cap on these visas, shouting: "Y'all
come!" Not only does this corporate-sponsored approach drain medical pros from countries that desperately need
them, but it also guts the middle-class pay structure and opportunities for homegrown nursing professionals.
The hospital lobby wails that there's a nursing shortage here, so there's no choice but to
go outside our borders. Hogwash. There's a shortage because hospitals won't pay what this highly-professional job warrants – and
because congress refuses to provide the funding needed to educate more American nurses. Last year alone, some 150,000
qualified applicants were rejected by nursing schools because of inadequate facilities and a lack of faculty to teach
|News and Opinion Concerning Health Savings Accounts, Medical Costs and
Health Care Reform
- Workforce Management: Federal Report
Calls for National Health Insurance. A proposal for universal health
care coverage has stirred a panic among advocates of consumer-driven initiatives favored by President Bush.
Excerpts: A federal report calling for a national health insurance program was issued last week by a committee
created by the Republican-led Congress. The proposal for universal coverage has stirred a panic among advocates
of consumer-driven health care initiatives favored by President Bush. The interim recommendations of the
Citizens’ Health Care Working Group, a 15-member committee created by the Medicare Prescription Drug,
Improvement and Modernization Act of 2003, recommends that all Americans have access to "a set of
affordable and appropriate core health care services by the year 2012." [...]
The group spent 15 months researching the state of health care in America, holding six
hearings with experts, health care companies, scholars, advocates and elected officials as well as 31
community meetings across the country. Members of the group read nearly 5,000 personal commentaries on
health care and weighed the results of Internet polls from 10,000 respondents. [...]
In making its argument for universal coverage, the report referenced a recent Rand study
that says Americans receive the right care about 50 percent of the time, regardless in most cases of
race, gender or financial status. The report concludes that despite "breathtaking advances in medical science,
American health care sadly underachieves."
| New on the Alliance@IBM
- Sam's Raise Comment page. This comment
page is for employee reaction to their pay raise, in comparison to the 29% raise that CEO Sam Palmisano received.
Send us your reactions to, yet another slap in the face for IBM employees. We will post them as soon as we
receive them. If you choose, please include in your comments; your location, job title, and years with the
- Job Cuts Status & Comments
- Comment 6/6/6: IBM is going to sell or lease the buildings in the 500 complex at RTP. They don't need
the space now that they've offshored most of the SWG development work to India and other low cost locations.
- Comment 6/6/6: 6/6/06 will be a good day for STG employees at RTP to work from home
and not answer the phone. 15% of jobs are being outsourced to India, 10% of jobs are being outsourced
to China, and 5% are going to Brazil. -Anonymous-
- Comment 6/6/6: Rumor is they have sold the 500 complex of buildings in RTP already -Anonymous-
- Comment 6/07/06: Re: the sale of the RTP 500 buildings...interesting. There are still
quite a few of us working in that facility, it cannot be closed down, and we cannot be merged onto main
site RTP until they move all of Lenovo out... FEDERAL mandate to keep us physically separated. I could
see them selling to another company and then leasing back if they thought they could somehow show it
saved money. Can anyone provide pointers to any concrete info on this subject, other than just rumors/hall
- Comment 6/08/06: Re: the sale of the RTP 500 buildings. Don't be overconfident in your
situation. Most of the Lenovo people have been moved off of the main facility. With the large number
of empty workstations in the IBM areas of the RTP complex along with ongoing attrition and more people
working from home, there is a significant number of empty workstations available for the few from the
500 complex who won't be offshored to India and other countries. Within the next 12 to 24 months most
non-customer facing positions within IBM will be offshored to India and other countries. Only the sales
and sales support teams will be left in the United States. -Anonymous-
- Comment 6/08/06: There are rumblings that other drastic changes are about to happen
in other parts of IGS, like AMS, EUS... etc. Marching orders could already be in the managers' hands.
They could be impacted too! I hope there is enough outrage in someone to post some real information here
on what is coming down the pike... -Anonymous-
- Comment 6/12/06: It's over for good ole IBM.....if they offer severance, I'm taking
it and gladly walking away, nothing can be worse then what IBM has become, year after year after year...do
you remember one positive thing IBM has done in 4 plus years now? Not a thing, every 6 months, it gets
worse and worse, IBM is sinking too quickly for anyone to save it, our competitors are out selling us
on costs for projects, NO ONE is safe these days, unless you speak Portuguese, Mark my words, Sam will
leave IBM in the next 5 years with a FAT FAT wallet thanks to the enormous numbers of his people he sold
off for pennies on the dollar..why work for a company that just doesn't care about you anymore??????????
- From the General Visitor's Comment
- Comment 6/09/06: 75K a week retirement! Man, that guy must have some expensive lifestyle to maintain
when most of us won't even get 75K a year. Oh but Sam is the great CEO that doesn't know how to really
grow the business. Oh well just waiting till they chase me out. Glad I sold all my IBM stock a long time
- Pension Comments page
|Vault Message Board Posts
get to the Indian bottom line..." by "wonderaboutibm". Full excerpt: I hope I
am not the only one getting sick and tired of reading all the crap about IBM and India. The media hype is sickeningly
all sweetness and light -- so in our self-appointed role as guardians of the truth (or at least an accurate
interpretation of trends and events,) let's start a thread on what is really going on here.
I can't claim intimate knowledge of IBM mgmt thinking -- wait! I take that back! The Indians
are CHEAP! Cost reduction reigns supreme. But what are those cheap Indians supposed to produce? Why, they
need to supplant RTC and Boulder, those wickedly expensive dinosaur U.S. operations. My guess is that the next target
will be Hursley, or maybe even Research in Hawthorne and Yorktown Heights. After all, they cost money, too. The
Indians are cheap. RTC, Boulder, Hursley, Yorktown Heights are not.
The fly in the ointment here is that our beloved mgmt really does believe they can find
the necessary skills in India. Yuk, yuk, the Indians I know tend to be smart, hardworking, uncreative, rigid and
inflexible. Not the best combination. Some believe the next generation of Indians (let's call them the I-2s) will
not have the negative attributes of their parents. Don't count on it, but even if the I-2s will be formidable competition
for U.S and European IT workers, it will take years to modernize the Indian workforce sufficiently. In the meantime
IBM will have phenomenal problems traipsing and wallowing across the subcontinent. The bell tolls for GBS, and the
Indians aren't even to the point yet of hearing it ringing.
the fuss?" (pertaining to IBM's new regional pay plan for exempt employees) by "MythAndMeaning".
Excerpts: I don't think this is such a big deal, and it may actually work to some people's benefit. The market
reality is that competitive salaries for staff vary by where you live. Does anyone dispute that fact? If we
can agree to that, then why wouldn't we want to allow manager to pay more to staff living, e.g., in NYC or
As a practical matter, my experience having gone through several comp cycles as a manager
is that the bands are so wide as to have little meaning. There is like a 2x range from lowest to highest.
The one banding area that constantly bites us on the hindquarters is that market rates for some staff in some areas
are outside the caps. Any relief that mitigates our need to hire someone as a B9 who has B8 skills just to make
salary requirements is a help to me -- and this is a real problem. Okay, now everyone can accuse me of being a mole,
shill, or lackey.
fuss explained" by "Dose of reality". Full excerpt: It's not the banding that is at
issue here - it is the actions being taken to normalize.
One would assume that when we hire in a premium city, we pay a premium to get a resource
that is comparable to what we get in Peoria. Why do we need to grant larger increases to the premium resource? What
sense does it make to give more money to someone with lower performance? Do you really believe that the PERCENTAGE
increase in COL in New York is that much higher than Peoria?
Economically, raises should be given for merit, not increases in the cost of eating at TGIF.
If someone in Peoria produces more in GM than someone in New York, that has to lead to a higher raise if
we want to optimize overall performance. We get what we give.
So much for the theoretical argument. The cynical but realistic argument is that this whole
change will just be a smokescreen to take more net money out of the compensation pool, as the vast majority of non-premium
location staff will be told that their raise is lower due to the geographical normalization, but the decrement there
will be much higher than the increment in the premium cities.
would disagree..." by "wonderaboutibm". Excerpts: You certainly CAN charge more, much more,
for a product after having spent more developing it. It's called premium pricing for a premium product. If
the "extra" money goes for building a premium product, then you come out ahead.
IBM is following a premium pricing scheme, to be sure, but so far as I can see, using Indian
labor is not yet a premium-product vehicle. It's just a way to cut production cost, while likely eroding
quality and trying to palm off the result as worthy of premium pricing. Good luck if it works, but it won't. By
the time it fails, SP will be gone on to his $4 million/year pension. At least, that's his plan. In the meantime,
we will hear lots of bromides about innovation, etc.
I think you are implying that the Indian IT market will expand. Maybe IBM feels that way;
I don't think the native Indian companies do. Aside from Tata, they don't seem to be making any effort in domestic
Indian business. Instead, they are almost purely classic leeches and freeloaders in foreign markets. Infosys is
a perfect example.