Offshoring: Is Anyone Winning?
The software maker Novell said Oct. 25 that the lay offs of 250 U.S. workers was part of an ongoing restructuring effort in hopes to slash costs. However, these jobs weren't being deleted per se, but moved to Bangalore, India where labor costs are lower than here, company spokesman Bruce Lowry told Reuters.
"While it's not a one-to-one match of jobs lost in the U.S. to jobs gained in Bangalore, the most significant impact was on product development," said Lowry. "The most important piece of that was, in fact, hiring engineers in India and reducing engineers in the U.S."
In a similar vein, outsourcing giant EDS offered early retirement to 12,000 U.S. employees in September. Just like Novell though, these jobs were not eliminated but sent overseas. CEO Ronald Rittenmeyer said he would be upping the work force in India, Brazil and the Czech Republic from 38,000 to 45,000 by the end of 2008.
There is little question that the U.S. workers got the short end of the stick in both of these situations. But theoretically, this should mean that the shareholders did win, in cost savings or the promise of better future earnings for the companies.
Yet Novell told its investors that these layoffs and hires would be part of a $35 to $45 million restructuring effort this year. EDS estimated in a SEC filing that the early retirements would cost between $70 million to $130 million.
Is this what is considered cost savings?