IBM cutting 5,000 jobs in US, shifting them to India

WASHINGTON - International Business Machines (IBM) Corp. plans to lay off about 5,000 US employees, with many of the jobs being transferred to India, a media report said Thursday.

The technology giant has been steadily building its work force in India and other locations while reducing the number of workers based in the US, The Wall Street Journal said citing people familiar with the situation.

Foreign workers accounted for 71 percent of Big Blue’s nearly 400,000 employees at the start of the year, up from about 65 percent in 2006.

Noting that outsourcing to India has long been a hot-button topic for IT employees in the US, the Journal said as US employers have shed millions of jobs in recent months, workers and politicians have stepped up their criticisms of the practice with little impact.

For IBM, shifting work to lower-cost countries has helped the company win overseas contracts and maintain healthy profits in its services business, which is its largest in terms of revenue and employment. IBM employed 74,000 people in India in 2007, the latest figures available.

IBM’s latest round of cuts show that even companies that have so far navigated the global recession profitably are continuing to slash costs, the financial daily said. In January, IBM reported $4.42 billion in quarterly profit.

Among other companies that are profitable, Microsoft Corp. announced plans for 5,000 layoffs earlier this year and Hewlett-Packard Co. is cutting some 25,000 people in the wake of its acquisition of Electronic Data Systems Corp., a rival of IBM’s services business.

Many of the IBM job eliminations are scheduled to take place in its global application-services group, which writes specialised software for businesses.

Some of these workers received a notice Wednesday indicating that nearly 2,000 workers in that group were due to be told they would be ‘participating in IBM’s current resource reduction action’.

An IBM spokesman declined to comment, the paper said. The company has said it expects to spend about $300 million to $400 million on severance-related charges this year, with most of it in the first half.