IT Outsourcing India

NEW YORK: IBM will cut about 5,000 jobs in the United States, adding to similarly large cuts in the past few months, sources with knowledge of the
matter told Reuters on Wednesday.

The job cuts will account for over 4 percent of IBM’s US workforce, which totaled around 115,000 at the end of 2008. The sources, who were not authorized to speak publicly on the issue, said the cuts will mostly be in IBM’s global services business, which includes outsourcing and consulting services.

An International Business Machines Corp spokesman declined to comment. The company, which had a total workforce of 398,455 as of end 2008, has not disclosed how many jobs it has cut so far this year, but has said it was making "structural changes" to reduce spending and improve productivity.

IBM, which now earns around two-thirds of its revenue from outside the United States, has been expanding its workforce in emerging markets like India and China.

At the end of 2008, employment in the BRIC countries — Brazil, Russia, India and China– totaled around 113,000.

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The recession has led some companies to outsource IT operations, despite trepidation about managed hosting and colocation.

A recent SearchDataCenter.com survey survey of 233 IT professionals asked whether the current economic downturn made companies more likely to consider IT outsourcing. Responses were mixed. More than 28% said they are less likely to outsource in this economy than before, but 23.08% said they are more likely to outsource during the recession. And 27.78% said they are as likely to outsource. The remainder weren’t sure. As mixed as the responses were, there is still a clear aversion to IT outsourcing, stemming from concerns over data security, quality of service, and the fear of rescinding control over data and applications. One IT director with a New Brunswick, Canada-based health insurance company said some of his company’s IT functions are outsourced, but management is careful with what it lets outside the four walls of the data center.

For this company, IT outsourcing only makes sense for commodity operations where economies of scale are necessary but turn around time is not a factor, he said. This company outsources the data center facilities — space, security, power, and cooling — but keeps control of data center operations, including server, network, and software management.

"Our organization requires quick and flexible response to market opportunities or software development projects, and we are leery of providing control to an outsource along the critical delivery path," the IT director said.

"We are very selective in what we choose to outsource. There is always a hesitation that an outsourcer will not provide quality services, will lack flexibility, and the long-term cost will be greater once they have you ‘hooked,’" he added.

Some companies would rather hire more IT staff before outsourcing to keep sensitive data in-house, said a lead systems software engineer at a major U.S. hospital. "Other than in-house long term contractors [who augment IT staff], we do not do any outsourcing and are not planning to. For us, the cost is greater, and there’s really no benefit that we couldn’t get by adding real staff," he said.

Hosting providers often have to overcome fears surrounding security and quality of service, and a few bad apples make it all that more difficult for IT pros to trust their data to hosting providers, explained Aaron Sawchuk, CTO and co-founder of ColoSpace Inc., which operates six data centers in New England. "We speak to many customers who have been burned by outsourcing vendors and end up being hypersensitive as a result," he said. "The only way to overcome this challenge is, one, through striving to deliver the best service, and, two, backing it up with a strong service-level agreement."

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