IBM"s India Gambit Pays Off. Europe Loses Out.

Posted by: Bruce Nussbaum on July 19, 2006

IBM reported second quarter profits up 11% and said it was due in large degree to shifting the cost of what I call “information labor” from Europe to India. This is very significant.

IBM has fired 14,500 people in the past 14 months, mostly in Europe, and replaced most of them with Indians.

Europeans will lament this shift and some may say that cheap labor in India is hurting them. Wrong perspective. To stay competitive in this integrated global marketplace engineers, scientists, designers, architects—all the information worker folks around the globe—have to boost their skill levels and value they offer for what they charge. It’s only natural to want the government or professional guilds to step in and establish rules, regulations and minimum compensation laws to stop the shift of jobs to Asia. But however, well-intentioned, it isn’t likely to work.

The commoditization of information and knowledge can’t be stopped so we all have to keep climbing the “value ladder” by differentiating ourselves and offering more for what we get paid. European information workers are very highly paid on a global basis. They have to offer IBM and other global corporations much, much more than their India and Chinese competitors. They aren’t. They can. They must.

Reader Comments

Lord

July 19, 2006 5:10 PM

have to boost their skill levels and value they offer for what they charge

Such naivete. What boost can compensate for a change in value of half or more? What boost is not cheaper or more readily accomplished in an area where costs are half or less than they are in the developed world? The rats should know by now that speeding up the treadmill won't get them anywhere.

designstudent

July 24, 2006 4:48 AM

This post is exactly what Friedman talks about in "The World is Flat." It isn't about speeding up the treadmill as earlier commented, it's about making sure that what you have to offer isn't vanilla, but something that adds flavor to the vanilla. Companies don't stay on top by staying the same and offering what everyone else does, so what makes an employee think they can stay the same and remain employeed by a company that is trying to stay on top. If you want your company to keep you, give them a reason. There is no "entitlement" to a job as much as the current developed work force likes to think. Indians don't expect the job so they work for it, and guess what? The person who works harder for it will get it.

Michael

July 27, 2006 8:27 PM

Having my business in United States, Switzerland and India; I increasingly favor hiring Indian IT professionals for their zeal and competetive nature. Just imagine, an average Indian has to pass an examination which 350 million take for a seat into a medical or engineering college; and you know for how many seats ? 10000. That gives you 2.8571428571428571428571428571429e-5. A european only cares for his 4 wks of vacation; the notion of customer satisfaction doesnt have its rightful seat in the EU parliament.

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Want to stop talking about innovation and learn how to make it work for you? Bruce Nussbaum takes you deep into the latest thinking about innovation and design with daily scoops, provocative perspectives and case studies. Nussbaum is at the center of a global conversation on the growing discipline of innovation and the deepening field of design thinking. Read him to discover what social networking works—and what doesn’t. Discover where service innovation is going and how experience design is shaping up. Learn which schools are graduating the most creative talent and which consulting firms are the hottest. And get his take on what the smartest companies are doing in the U.S., Asia and Europe, far ahead of the pack.

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