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Latha Jishnu: Why IBM got the blues on offshoring

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There are several coincidences and curious turns in IBM’s for outsourcing jobs which has caused such a huge outcry in the US. After critics slammed it a fortnight ago, the computer giant said it was withdrawing the application but it leaves several questions hanging over the controversial patent application which Big Blue had submitted for the second time.

IBM’s ‘invention’ is a computerised system that automates the process of sending jobs to global locations based on the advantages each location offers. Called ‘Method and System for Strategic Global Resource Sourcing’, the patent application was withdrawn within days of it being made public on March 26 by the US Patent and Trademark Office (USPTO). It was ripped apart immediately by the lobby which opposes business process patents.

“An important challenge in shifting to globally integrated enterprises”, says the patent application, “is planning the location and capacity of the global workforce. There is a need to provide a robust and reusable sourcing template to identify new/expand existing global resource pools, analyse trade-off qualitative and quantitative aspects across multiple global locations, and model the global nature of resource sourcing.”

The patent application describes a system that would remove much of the difficulties and uncertainties involved in relocating jobs around the world. has, therefore, put together “method and system for determining an effective sourcing strategy to support a global portfolio of resources, over time, which concurrently incorporates qualitative and quantitative factors, some of which may be non-linear in nature”. Such a system would weigh goals like, say, “50 percent of resources in China by 2010” against such factors as labour costs, infrastructure and the “minimum head count to qualify for incentives”.

Existing methods, says IBM, may consider both qualitative and quantitative aspects of sourcing, but they may be evaluated using two sets of metrics which are not readily comparable. “In contrast, this invention allows decision makers to quantitatively explore trade-offs between one or more qualitative factors, or between qualitative and quantitative factors. Therefore, this invention provides a more effective method for making resource sourcing decisions.” Ergo, a great new tool for making outsourcing simpler and more efficient.

What is curious is that USPTO made the patent claim public on March 26, shortly after IBM began laying off workers, although the application had been filed in September 2007. March 26 has been dubbed ‘Black Thursday’ by IBM employees because 5,000 workers in the US were given pink slips on that day.

IBM is under constant fire from workers, labour leaders and Congressmen for shipping out jobs to cheaper locations — India is viewed as a prime centre for sucking out jobs from America — ever since it announced job cuts across the US this year. As it is, the US accounts for less than a third of its workforce. In January, IBM reported that about 115,000, or 29 percent, of its workers were in the US.

Thus, the publication of IBM’s claim for a system that would make of jobs more efficient could not have come at a more indelicate time. It was politic on Big Blue’s part to say that the filing was an error and would be withdrawn. Company spokesman Steve Malkiewicz also said the filing “is contrary to our patent policy on business methods”.

That is plain nonsense. If indeed the claim is contrary to IBM’s policy, why was it filed at all? And this is the second such filing by Big Blue on a similar process and the second withdrawal in just 16 months. In January 2006, IBM had filed a claim for ‘A method for identifying human-resource work content to outsource offshore of an organisation,’ but it was withdrawn in October 2007, immediately after the application was made public. The company had said at that time that it was pulling out the claim because it lacked “substantial technical content”. Yet, even then, a second application had already been filed in September 2007!

Patent analysts who have studied the two filings declare that there is very little difference in the filings. So what is it to prevent it from trying again?

Outsourcing is important for IBM, as for many other companies which need to have a global workforce for more efficient operations, and to capitalise on sales opportunities in emerging high-growth markets such as India, China and countries in Eastern Europe. After all, more than half of IBM’s revenues are generated in countries outside the US.

It’s unfortunate that a controversy on offshoring has become embroiled in a patents issue. The two are distinct. One is a practical necessity, the other a bad idea altogether.

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