Week of October 11, 2004
  Blockbuster Deal

Big Blue’s Big Move:
IBM Adding 1,250 Northern Virginia Jobs

by JACK LYNE, Site Selection Executive Editor of Interactive Publishing

IBM’s huge Fairfax County expansion "speaks volumes about the company’s commitment to the commonwealth at a time when the technology industry is under fire for sending many jobs overseas," said Virginia Gov. Mark Warner (pictured speaking at Virginia Military Institute's commencement
last year).
Photo: Virginia Military Institute
NORFOLK, Va. —aggressively expanding International Business Machines (IBM at www.ibm.com), has decided to add 1,250 high- end jobs in Fairfax County, Va. (www.fairfaxcountyeda.org), part of the Washington, D.C., metro. The newly created positions in northern Virginia will pay US$95,000 a year on average, IBM officials said. Virginia Gov. Mark R. Warner (D) announced Big Blue’s jumbo-size expansion during his remarks opening the second day of the state’s annual Information Technology Symposium (www.covits.org) in Norfolk. "This is a tremendous announcement for Virginia," Warner said on Sept. 27th. "IBM’s decision to expand in Fairfax County speaks volumes about the company’s commitment to the commonwealth at a time when the technology industry is under fire for sending many jobs overseas."

Big Blue Part of Big
Flap over Job ‘Offshoring’
       IBM, in fact, has been among the U.S. companies under heavy fire in the highly charged debate over job "offshoring."
       That criticism really began to boil over when IBM revised its 2004 job-creation projections. After originally estimating that it would add 10,000 jobs this year, the company in early 2004 upped that projection to 15,000. That number clearly indicated that IBM has successfully revitalized itself from its deep plunge in the 1990s. It was where the jobs were headed, though, that touched off an uproar. Approximately 10,000 of the 15,000 newly created positions would be sited outside the U.S., according to in-house documents that were obtained by The Wall Street Journal. But the real detonator was the fact that IBM was going to move 3,000 existing jobs offshore this year, company officials projected in their memos.
"[IBM] can’t simply lock into place current jobs, skills, businesses [and] nations," CEO Sam Palmisano noted at the company’s annual shareholder meeting in late August.

       The documents also indicated that the IBM was acutely aware that offshoring was a political land mine. One memo advised that the "terms ‘on-shore’ and ‘off- shore’ should never be used." The documentation also indicated that IBM’s human resources arm had prepared a "suggested script" for managers to follow when telling workers that their jobs were being relocated. The memos further advised that all managers’ written communications with employees in offshored positions should be "sanitized" by IBM’s communications and human resources staff.

Protestors Gather for
IBM Shareholders’ Meeting
        The flap reached a major peak at IBM’s annual meeting in late August in Providence, R.I. Gathered outside the Rhode Island Convention Center was a large crowd of current and former IBM workers who’ve united as Alliance@IBM (www.allianceibm.org), Local 1701 of Communications Workers of America. Entering shareholders were greeted with chants of "Offshore the CEO!" CEO Sam Palmisano touched on the offshoring controversy during his remarks to shareholders.
       "Driven by our values, we’re also thinking hard about some major economic and societal issues that are implicit in the emergence of a global, innovation- driven economy," he noted. "For example, I think most people recognize that we can’t simply lock into place current jobs, skills, businesses, and you can’t lock down nations."
       IBM, the CEO explained, was a global company that needed to "look at a global skill pool around the world. Sometimes you have to go out and acquire new strengths [and] leave behind parts of your business that no longer represent high value to clients and no longer differentiate the company. And you have to do this without having an emotional attachment to things that don’t represent your future."
Major companies headquartered in Fairfax (pictured).include AOL, which is based in Dulles, Va.

       Palmisano didn’t mention the compelling economics that are driving many job relocations. As one example in IBM’s leaked memos pointed out, the company could hire a programmer in China for $12.50 an hour; a similarly skilled U.S. programmer would make $56 an hour.

IBM’s Newest Area Office Will
House Part of Public-Consulting Arm
       Palmisano’s remarks obviously won’t put the offshoring debate to bed. In Fairfax County, though, IBM’s on-shoring was the warmly welcomed topic at hand.
       "Virginia understands that states need to create a fertile environment for innovation that attracts companies and attracts jobs," IBM Vice President of Governmental Programs Christopher Caine said from the company’s headquarters in Armonk, N.Y. "Led by Gov. Warner, Virginia has demonstrated innovative thinking and launched contemporary programs that leverage a first- rate educational system, understand the importance of enhanced homeland security, and bolster economic development approaches for the 21st century."
After being criticized for its plans to offshore 3,000 of its existing jobs this year, IBM backed off in late August, saying that it would only relocate 2,000 positions.
Photo: Alliance@IBM

       IBM officials said that the 1,250 new jobs will be part of IBM’s public-sector consulting arm. But they didn’t specify the governmental departments with which those employees will be working. The company’s Washington-based governmental clients include the U.S. Department of Defense and NASA. One of Fairfax County’s obvious draws for IBM is the county’s proximity to Washington, which sits 19 miles (30 kilometers) to the east.
       Big Blue’s big gob of new jobs will be located in the county’s Fair Lakes area, IBM officials said. The company’s new employees will be housed in leased space in an existing 200,000-sq.-ft. (18,000-sq.-m.) building. The company said that it will spend an estimated $10 million to fit out the space to its needs. IBM already has 7,000 employees in the Washington area, including staffers with PricewaterhouseCoopers Consulting, which the company acquired two years ago. The Fair Lakes office, though, will be IBM’s first site-selection sortie into Fairfax County.

Offshoring Squabble Prompts IBM to
Reduce Relocated Jobs by 50 Percent
       The company will be joining many other high-profile companies in the county. A number of major firms are headquartered in Fairfax County, including America Online, Capital One Financial, Federal Home Mortgage Loan Corp. (Freddie Mac), Gannett Corporation, General Dynamics, Nextel
IBM’s major expansion will enable it "to take full advantage of our highly skilled workforce and a quality of life that is second to none," said Fairfax County Board of Supervisors Chairman Gerald Connolly (pictured).
Communications, NVR and Sallie Mae. The county’s biggest employer, though, is Inova Health System, which has about 10,000 workers in the area.
       Fairfax County’s highly rated school system will also be a recruiting boon. About 90 percent of the county’s high school graduates go on to some form of post-secondary education. The average score for Fairfax students on the 2002 Scholastic Aptitude Test (SAT) was an unusually high 1096. IBM’s 2004 job-creation score has also risen again. In August, the company upwardly revised its projections for 18,000 new jobs this year. That will bring IBM’s worldwide employment to more than 330,000 employees, the highest tally since the recession of the early 1990s.
       Significantly, IBM has also now reduced the number of jobs that it will offshore from 3,000 to 2,000. In addition, as Palmisano emphasized at the August shareholders’ meeting, the company has created a Human Capital Alliance to retain and retrain employees whose jobs are offshored.
       The offshoring controversy, IBM officials privately conceded, played a major role in the change in the company’s offshoring plans actor driving those changes. Fairfax County’s new consulting jobs reflect one of IBM's growth areas. Other growth areas, IBM officials explained, include software development for Linux- based operating systems, as well as grid computing and "business transformation services."





©2004 Conway Data, Inc. All rights reserved. Data is from many sources and is not warranted to be accurate or current.