IBM

In recent months the U.S. technology giant International Business Machines has grabbed headlines by sending outsourcing operations to India. IBM has been locating various business functions internationally since the 1910s, but lately the nature of its foreign endeavors has shifted. Rather than expanding abroad to better service overseas markets, IBM is now moving high paying skill-intensive jobs to low wage countries like India.

The story can be traced back to the 1970s when IBM began to move some production processes out of the United States and set up research centers abroad. However, at this time such actions had little effect on American workers. These foreign operations primarily served local markets (as late as 1986 ninety percent of Mexican-manufactured computers were sold in Latin America), and IBM was rapidly adding jobs in the United States.

In the early 1990s IBM began to face stiff competition from clone manufacturers in the personal computer market. Financial pressures forced the company to sell or close many of its production facilities. At the same time, IBM was laying the groundwork for global sourcing options. Research and development facilities were constructed in China and India in the mid-1990s and the bulk of hardware manufacturing began to migrate to South East Asia. A painful recession and the collapse of many dot-com industries at the end of the 1990s forced technology companies to look for new ways to cut costs while maintaining profitability. IBM responded by cutting its workforce by nearly 30 percent and outsourcing many of the functions that it had previously done itself. Some of these functions remained in the U.S. but were performed by other companies; other jobs went overseas.

The current wave of IBM outsourcing to India has been remarkable for two reasons. First, the jobs being sent overseas are much higher on the corporate value chain than has been seen in the past. Rather than the monotonous programming and call center jobs that American workers prefer not to perform, high-paying engineering and management positions have been moved to India. Secondly, IBM seems to have carried out these moves in a rather uncaring way. Employees have been asked to train their foreign replacements and there are even instances where these replacements have been present when workers heard that they were being laid off.

IBM's participation in global sourcing is not entirely one-sided. Their commitment to provide global networking solutions has won them a contract to provide information technology services to India's largest privately owned telecom company. Deals such as this one, which are likely to send employment back to the U.S., may help IBM convince the skeptical American public of the benefits of global integration and outsourcing.

Research Triangle Park

The small area of North Carolina, eight miles long and two miles wide, known as Research Triangle Park is considered the center of North Carolina's Information Technology industry. With over 100 research and development organizations, Research Triangle Park (RTP) has become the largest research park in the United States. Approximately 40,000 full-time employees work in RTP, over 99% of which work for Research and Development related organizations.

Information technology is among the largest industries represented. RTP is currently home to twenty-six information technology companies with 21,938 employees. Refer to the table below for a list of the companies.

With thousands of IT employees, North Carolina’s Research Triangle Park has experienced the highly publicized affect of outsourcing within recent years. Although it still remains unclear whether outsourcing will adversely affect RTP in the long term, it has cost thousands of IT workers their jobs within recent years. For an explanation on how outsourcing may ultimately prove beneficial to RTP, refer to Dimensions of Globalization.

In an attempt to combat the negative affects outsourcing has had on RTP, the state of North Carolina has encouraged workers to further develop their skills through the North Carolina Community College System. The 58-campus community college system of North Carolina has existed for forty years to help prepare its workforce for the needs of national and international corporations. Recently, because of the global shift toward a more technology-intensive society, the community college system has placed an increased emphasis on the development of technological skills. If the RTP is to remain as one of the nation’s premier research parks, its labor force will continually need to improve their computer related skills.

In the technology-driven economy we experience today, no information technology jobs seem secure. IT labor continues to be outsourced because those tasks can be performed in other countries at a significantly lower cost. Therefore, if North Carolina and the Research Triangle Park in particular are to remain attractive to major corporations, the skills of its workforce must be among the best in the world. If North Carolina is capable of supplying a workforce whose skills are unmatched, businesses will continue to locate within the state and pay higher wages than they would overseas.