IBM: where the jobs aren't

Recent articles on offshoring have duly noted that IBM plans on creating 5,000 jobs domestically this year. Sounds good but the Wall Street Journal does some digging and points out that, overall, Big Blue "may actually wind up extinguishing more U.S. jobs in the economy at large than it creates this year -- even while adding a little to its own payroll."

The anomaly springs from one of IBM's most important businesses, a more traditional form of "outsourcing." Other companies hire IBM to take over their payroll, IT and other non-core, back-end operations to reduce costs.

As part of these agreements, IBM usually hires the employees of the client company -- sometimes thousands of them -- who handle the work being transferred. Such outsourcing now brings in about $15 billion a year for IBM, representing 17% of its revenue and much of its growth prospects.

Only a small part of this kind of outsourcing typically results in jobs being exported to other countries -- a trend known as "offshoring." But it does result in another kind of job loss: Often, IBM ends up laying off some of the workers it hires from outsourcing clients as it makes the acquired operations more efficient. Meanwhile, the workers from the client companies who remain on the IBM payroll often suffer cuts in pay and benefits.

The pattern worries many IBM workers, both longtime employees and those who joined Big Blue as part of an outsourcing agreement. And it helps explain, in part, why U.S. hiring has been anemic even as the economy expands by other measures.

And yes, the Journal notes, the jobs of some of those outsourced workers laid off by IBM are offshored.