Are we giving up on near shore model? Will just be India in future + "AI"?
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Not only is it less costly to do business in India in regard to employee costs, the national rules guidelines and focus on green IT, pollution and general well being of communities and not nearly as strict or enforced in India. The smell lies heavy in the air of all busy communities. Running water and toilet systems are not common place outside of main metropolitan areas. Rich and Middle class are well to do. The poor is very poor, this population is high, and many families live in horrible conditions. EU and US IBMers would be sickened that the company chooses to off shore to take advantage of this market for selfish gains. All to please the stockholders and line exec pockets. How do they sleep at night?
IBM has already disclosed where they are heading. When IBM spunoff Kyndryl to a public company, they were required to disclose their go to market business model for developed marketplaces. (note every publicly held consulting/outsourcing company has to disclose this in their operating model). Kyndryl did this, and their NA model was 8% onshore, 20% near shore, and 72% offshore. Why would you expect IBM to vary from that model when it was already in place within GTS? Yes there are different variables for GTS vs GBS, BUT they are mostly labor intensive services models, with GTS actually having to invest more in equipment and less in labor vs GBS. Consulting is a labor intensive game and with IBM moving toward a Fortune 500 enterprise model, you can expect IBM to squeeze the onshore labor component as much as possible to lower costs. The skeleton crew onshore model is now in vogue for all of the consulting companies, as bandwidth is cheap. Will IBM get to an 8% model with GBS for NA? Most likely not, but you can certainly expect a skeleton crew on shore model to take hold with near shore getting squeezed to off shore as AI takes hold. Welcome to the world of services. How do you lower costs? Move them to where costs are lower.
"that leaves manufacturing, software development and marketing, "
Big push to move marketing to India augmented with AI. This should be interesting to watch. Unreadable, but interesting.
The racism and / or microaggressions that I read on this site are just awful. During an office hours call a few years back, Arvind made a comment about what smaller companies (like AirBnB) can do with $100M USD vs. IBM. And he’s absolutely correct. There are so many ways to streamline processes, remove blockers, and cut costs - but we constantly get in each others way.
There is nothing from with nearshoring and offshoring as long as there is alignment on ways of working, flexibility in scheduling, and a willingness to learn. Also this is an opportunity for leadership, when you lift others up who need to build and grow certain skills. Why not help other economies flourish and grow vs. just isolate ourselves from the world. That’s I for International, not I for India.
@1sqa+1rMxn0fn IBM's rush to reduce service labor cost is all great and everything (well, er...maybe not), but IBM is dumping its service lines of business. Kyndryl is gone, consulting is largely on the chopping block...that leaves manufacturing, software development and marketing, with maybe some emphasis on enterprise consulting and other stuff (cloud, AI, etc.) What kind of labor mix does that need and where will that labor reside?
It’s all about costs. India’s labor rate is approx 35% of the US or Northern Europe. Mexico and Eastern Europe are approx 60% of the US or Northern Europe. Thus the decision is easy. There is a second factor at play and it’s India’s lead in infrastructure investment. India approx 20 years ago invested in low level outsourcing infrastructure (internet, education, lower electrical rates, buildings, etc etc) and has continued to invest and move up scale to higher value. That gives them at least a 10 year head start over everyone else thus they have much more scale. This is what happens when you become a services business. Labor is your major cost and it’s a rush to the bottom to lower it. Cheap bandwidth/internet has become the great equalizer when it comes to services labor.
Because ibm realized the us dollar is now on par with 2nd and 3rd world countries. Why pay when you can get them local now. You just need to cross the wide open border. I say Come on in and destroy our way of life!!!
That is AKs plan what do you think the "I" stands for? Not International anymore