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Monday, April 26, 2010 11:53 PM


"Crowd-Sourcing" IBM to Cut 3/4 of its Permanent Staff by 2017?


Computer Weekly and its sister publication, Personnel Today, claim IBM crowd sourcing could see employed workforce shrink by three quarters

Multinational firms saddled with huge people costs are considering downsizing their permanent workforce and hiring sub-contractors on a scale never seen before - presenting an "enormous" management task for HR.

IT giant IBM told Personnel Today that the firm's global workforce of 399,000 permanent employees could reduce to 100,000 by 2017, the date by which the firm is due to complete its HR transformation programme.

Tim Ringo, head of IBM Human Capital Management, the consultancy arm of the IT conglomerate, said the firm would re-hire the workers as contractors for specific projects as and when necessary, a concept dubbed 'crowd sourcing'.

"There would be no buildings costs, no pensions and no healthcare costs, making huge savings," he said

When asked how many permanent people IBM could potentially employ in 2017, Ringo said: "100,000 people. I think crowd sourcing is really important, where you would have a core set of employees but the vast majority are sub-contracted out."

He stressed the firm was only considering the move, and was not about to cut 299,000 jobs, as staff would be re-hired as contractors.

An IBM spokesman denied the firm was about to shrink its permanent workforce by three quarters in seven years.

He said: "The comments are without merit. This was pure speculation about future job movements without any basis in fact. In fact, the comments run counter to IBM's history of growing its global workforce over each of the last eight years."
What is Crowd Sourcing?
Crowd sourcing is the act of taking a job traditionally performed by an employee and outsourcing it to an undefined group of people on a project-by-project basis, in the form of an open call.

Firms wishing to follow this model could encourage employees to set up a company with 10 or more colleagues, and buy back their services as and when needed.
Threat is Real

I will say upfront that I have no idea which is more accurate, the claims by Personnel Today or IBM's denial.

That aside, it should be crystal clear that outsourcing is ongoing and a very real threat to a whole gamut of IT professionals. Thus, even if the rumor is not true today, it may easily be true tomorrow.

Trend Watching

I keep wondering how long it will be before the accounting profession is hit hard by outsourcing. So far, it has hardly been touched. Yet, accounting is a conceptually easy target. I believe the only thing holding back outsourcing accounting jobs is fear that data (account numbers, credit card numbers, proprietary results, etc) falls in the wrong hands.

In regards to information technology, every week I receive emails from people who were outsourced or fear being outsourced.

On March 19th I wrote how Applied Materials (AMAT) and cutting edge research in clean energy was moving to China: See High Tech Research Moves From U.S. To China.

It is no secret that manufacturing of all kinds is still headed to China, and various IT programming and design work has gone to India which lends credence to Personnel Today's claim.

Finally, even if the "Crowd-Sourcing" stays in the US, benefit levels in the crowd are highly unlikely to be the same benefits as direct employees of a fortune 500 company. These are very deflationary trends.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
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