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With American corporations under increasing pressure to cut costs and
build global supply networks, two senior IBM officials told their
corporate colleagues around the world in a recorded conference call
that IBM needed to accelerate its efforts to move white-collar, often
high-paying, jobs overseas even though that might create a backlash
among politicians and its own employees.

During the call, IBM's top employee relations executives said that 3
million service jobs were expected to shift to foreign workers by 2015
and that IBM should move some of its jobs now done in the United
States, including software design jobs, to India and other countries.

"Our competitors are doing it and we have to do it," Tom Lynch, IBM's
director for global employee relations, said in the call. A recording
was provided to The New York Times recently by the Washington Alliance
of Technology Workers, a Seattle-based group seeking to unionize
high-technology workers. The group said it had received the
recording--which was made by IBM and later placed in digital form on an
internal company Web site--from an IBM employee upset about the plans.


IBM's internal discussion about moving jobs overseas provides a
revealing look at how companies are grappling with a growing trend that
many economists call "offshoring." In decades past, millions of
American manufacturing jobs moved overseas, but in recent years the
movement has also shifted to the service sector, with everything from
low-end call center jobs to high-paying computer chip design jobs
migrating to China, India, the Philippines, Russia and other countries.


Executives at IBM and many other companies argue that creating more
jobs in lower cost locations overseas keeps their industries
competitive, holds costs down for American consumers, helps to develop
poorer nations while supporting overall employment in the United States
by improving productivity and the nation's global reach.

"It's not about one shore or another shore," an IBM spokeswoman, Kendra
R. Collins, said. "It's about investing around the world, including the
United States, to build capability and deliver value as defined by our
customers."

But in recent weeks many politicians in Washington, including some in
the Bush administration, have begun voicing concerns about the issue
during a period when the economy is still weak and the
information-technology, or IT, sector remains mired in a long slump.

At a Congressional hearing on June 18, Bruce P. Mehlman, the Commerce
Department's assistant secretary for technology policy, said, "Many
observers are pessimistic about the impact of offshore IT service work
at a time when American IT workers are having more difficulty finding
employment, creating personal hardships and increasing demands on our
safety nets."

Forrester Research, a high-technology consulting group, estimates that
the number of service sector jobs newly located overseas, many of them
tied to the information technology industry, will climb to 3.3 million
in 2015 from about 400,000 this year. This shift of 3 million jobs
represents about 2 percent of all American jobs.

"It's a very important, fundamental transition in the IT service
industry that's taking place today," said Debashish Sinha, principal
analyst for information technology services and sourcing at Gartner, a
consulting firm. "It is a megatrend in the IT services industry."

Forrester also estimated that 450,000 computer industry jobs could be
transferred abroad in the next 12 years, representing 8 percent of the
nation's computer jobs.

For example, Oracle, a big maker of specialized business software,
plans to increase its jobs in India to 6,000 from 3,200, while
Microsoft plans to double the size of its software development
operation in India to 500 by late this year. Accenture, a leading
consulting firm, has 4,400 workers in India, China, Russia and the
Philippines.

Critics worry that such moves will end up doing more harm to the
American economy than good.

"Once those jobs leave the country, they will never come back," said
Phil Friedman, chief executive of Computer Generated Solutions, a
1,200-employee computer software company. "If we continue losing these
jobs, our schools will stop producing the computer engineers and
programmers we need for the future."

In the hourlong IBM conference call, which took place in March, the
company's executives were particularly worried that the trend could
spur unionization efforts.

"Governments are going to find that they're fairly limited as to what
they can do, so unionizing becomes an attractive option," Lynch said on
the recording. "You can see some of the fairly appealing arguments
they're making as to why employees need to do some things like
organizing to help fight this."

The IBM executives also warned that when workers from China come to the
United States to learn to do technology jobs now being done here, some
American employees might grow enraged about being forced to train the
foreign workers who might ultimately take away their jobs.

"One of our challenges that we deal with every day is trying to balance
what the business needs to do versus impact on people," Lynch said.
"This is one of these areas where this challenge hits us squarely
between the eyes."

Lynch warned that with the American economy in an "anemic" state, the
difficulties and backlash from relocating jobs could be greater than in
the past.

"The economy is certainly less robust than it was a decade ago," Lynch
said, "and to move jobs in that environment is going to create more
challenges for the re-absorption of the people who are displaced."

The IBM executives said openly that they expected government officials
to be angry about this trend.

"It's hard for me to imagine any country just sitting back and letting
jobs go offshore without raising some level of concern and
investigation," Lynch said.

Those concerns were pointedly raised on June 18, when the House Small
Business Committee held a hearing on "The Globalization of White-Collar
Jobs: Can America Lose These Jobs and Still Prosper?"

"Increased global trade was supposed to lead to better jobs and higher
standards of living," said Donald A. Manzullo, an Illinois Republican
who is the committee chairman. "The assumption was that while
lower-skilled jobs would be done elsewhere, it would allow Americans to
focus on higher-skilled, higher-paying opportunities. But what do you
tell the Ph.D., or professional engineer, or architect, or accountant,
or computer scientist to do next? Where do you tell them to go?"

The technology workers' alliance is highlighting IBM's outsourcing
plans to help rally IBM workers to the union banner.

"It's a bad thing because high-tech companies like IBM, Microsoft,
Oracle and Sun, are making the decision to create jobs overseas
strictly based on labor costs and cutting positions," said Marcus
Courtney, president of the group, an affiliate of the Communications
Workers of America. "It can create huge downward wage pressures on the
American work force."

Mehlman, the Commerce Department official, said companies were moving
more service jobs overseas because trade barriers were falling, because
India, Russia and many other countries have technology expertise, and
because high-speed digital connections and other new technologies made
it far easier to communicate from afar.

Another important reason for moving jobs abroad is lower wages.

"You can get crackerjack Java programmers in India right out of college
for $5,000 a year versus $60,000 here," said Stephanie Moore, vice
president for outsourcing at Forrester Research. "The technology is
such, why be in New York City when you can be 9,000 miles away with far
less expense?"

Company executives say this strategy is a vital way to build a global
company and to serve customers around the world.

General Electric has thousands of workers in India in call center,
research and development efforts and in information technology. Peter
Stack, a GE spokesman, said, "The outsourcing presence in India
definitely gives us a competitive advantage in the businesses that use
it. Those businesses are some of our growth businesses, and I would say
that they're businesses where our overall employment is increasing and
our jobs in the United States."

David Samson, an Oracle spokesman said the expansion of operations in
India was "additive" and was not resulting in any jobs losses in the
United States.

"Our aim here is not cost-driven," he said. "It's to build a 24/7
follow-the-sun model for development and support. When a software
engineer goes to bed at night in the U.S., his or her colleague in
India picks up development when they get into work. They're able to
continually develop products."