The Globally Integrated Job Market

Stephen DeAngelis

July 12, 2007

The recent terrorist attacks in the United Kingdom are sending shockwaves across the Asian work force, especially among the Indian medical community which has never had past difficulty placing workers in foreign countries. The real losers, however, continue to be educated Muslims whose opportunities for international employment and freedom of movement shrink with each new attack. It’s unfortunate since the world is on the cusp of taking advantage of a more globally integrated work force, despite the current immigration debates ongoing in most developed countries. Steve Lohr, writing for the New York Times, provides a glimpse into how IBM now sees the global work force [“At I.B.M., a Smarter Way to Outsource,” 5 July 2007].

A little over a year ago, I wrote a post about IBM’s Sam Palmisano’s vision of globally integrated enterprises [Globalization and Resilient Enterprises]. Enterprises can’t be integrated globally without also integrating the work force. In Lohr’s article, Palmisano notes that it doesn’t make sense for IBM to hire permanently all of the workers it requires because many of them are only required for specific projects. When most people think about outsourcing, however, they think about jobs going overseas (like to India, where programmers make about a third of what a programmer makes in the US). Lohr begins his article talking about one IBM worker, Jeffrey Taft, who commutes each week from Pennsylvania to Texas to support a project that requires face-to-face work that can’t be outsourced overseas. Nevertheless some of programming tasks that support Taft’s project are completed in India. This is the kind of global work force integration that supports the kind of globally integrated enterprise Palmisano believes marks the future. Lohr reports:

“The trick for companies like I.B.M. is to figure out what work to do where, and, more important, to keep bringing in the kind of higher-end work that needs to be done in this country, competing on the basis of specialized expertise and not on price alone. The debate continues over how much skilled work in the vast service sector of the American economy can migrate offshore to lower-cost nations like India. Estimates of the number of services jobs potentially at risk, by economists and research organizations, range widely from a few million to more than 40 million, which is about a third of total employment in services. Jobs in technology services may be particularly vulnerable because computer programming can be described in math-based rules that are then sent over the Internet to anywhere there are skilled workers. Already, a significant amount of basic computer programming work has gone offshore to fast-growing Indian outsourcing companies like Infosys, and Tata Consultancy Services. To compete, companies like I.B.M. have to move up the economic ladder to do more complicated work, as do entire Western economies and individual workers. ‘Once you start moving up the occupational chains, the work is not as rules-based,’ said Frank Levy, a labor economist at the Massachusetts Institute of Technology. ‘People are doing more custom work that varies case by case.’ In the field of technology services, Mr. Levy said, the essential skill is ‘often a lot more about business knowledge than it is about software technology — and it’s a lot harder to ship that kind of work overseas.’ The offshore specialists in India are learning that lesson. As they increasingly compete for higher-end work, the Indian companies are hiring thousands of workers this year in the United States, adding an odd twist to the offshoring trend. Tata alone plans to recruit 1,000 workers in America.”

I have argued before that the natural evolution of the work force can’t be stopped without serious global implications. To support this move up the occupational chain, the American education system has to gear up for it and parents and teachers must encourage students to pursue career paths that support it. For IBM, which is a manpower intensive company, how a broadbased work force can be seamlessly cobbled together is a matter of great interest.

“For I.B.M., the world’s largest supplier of technology services, moving up to more sophisticated work is not the only step in its strategy to address the rising global competition. Labor represents 70 to 80 percent of the cost in traditional technology service contracts, and the traditional work of maintaining and updating software and data centers for corporate customers is still a large part of I.B.M.’s services business. So I.B.M. has moved aggressively to tap the global labor pool, and it is increasingly using software to automate as much traditional services work as possible. Today, I.B.M. employs 53,000 people in India, up from 3,000 in 2002; in India, the salaries for computer programmers are still about a third of those in the United States. Over the same span, the company’s work force in the United States declined slightly, to 127,000 at the end of last year. I.B.M. is also one of the world’s largest software companies. And its software development work, bolstered by dozens of acquisitions in the last few years, is more and more being done with an eye for use in its services business — to substitute software automation for labor. Smarter, more customized software can automatically handle some programming chores. I.B.M. employs 200,000 people worldwide in its services business, and if growth means constantly having to add more people, the business is in trouble. ‘We couldn’t keep building out labor,’ Samuel J. Palmisano, the chief executive, said. ‘The long-term strategic answer was not to have a half a million people working for I.B.M.’ Today, the company’s global work force is organized in clusters of business expertise and connected by high-speed communications links. Project managers can search worldwide for the right people with the right skills for a job. One tool is Professional Marketplace, a Web-based database of people and expertise. The idea is to build networks for producing and delivering technology services much like the global manufacturing networks that have evolved over the last couple of decades. Look inside a computer or automobile and the parts come from all over the world. High-end technology services projects increasingly will follow that formula, combining skills from across the globe and delivered on-site or remotely over the Internet.”

A couple of days ago I wrote a post about work being done by John Hagel and John Seely Brown on creation nets. The Professional Marketplace may one day evolve into something that looks more like a creation net than a searchable data base. Palmisano sees the globally integrated work force as a key component of next wave of business transformation.

“Mr. Palmisano sees the globalization of services as the next big shift in the business landscape, and I.B.M. is moving to adapt. ‘We’re reinventing I.B.M. once again,’ he said. ‘We’re reinventing it by moving up to the higher-value portions of our industry and creating this globally integrated enterprise.’ The utility project I.B.M. is doing in Texas offers a glimpse of the global formula. The far-flung work team includes research scientists in Yorktown Heights, N.Y., and Austin, Tex.; software developers in Pune and Bangalore, India; engineering equipment and quality-control specialists in Miami and New York; and utility experts and software designers like Mr. Taft that have come from Philadelphia, San Francisco, Los Angeles, Chicago, Raleigh, N.C., and elsewhere. I.B.M. plans to use the skills learned and software written for the smart-grid project in work with utility clients around the world. In the services field, these are deemed ‘reusable assets,’ reducing costs in the future.”

With xenophobia apparently on the rise around the world, putting in place a strategy that takes advantage of indigenous workers for face-to-face requirements and that can use the talents of other specialists as necessary (regardless of where they are located) makes a lot of sense. It also emphasizes the importance of having an educated work force that can work both locally and globally (i.e., through travel and virtually).