Did outsourcing just save American jobs?
Just a quick note before the day starts in full flow choc-a-bloc with meetings. For all those really loud people who have dismissed outsourcing and given it so much grief, go and take a look at IBM’s Q4 2007 earnings call. A lot of IBMers in the US are getting to keep their jobs because of their company’s strong performance have to thank outsourcing for it. Services, which is mostly driven by outsourcing has been their rock star performer:
Looking at our results by segment, Services continued the momentum we’ve seen over the year. Global Technology Services revenue was up 16%, profit up 26%. Global Business Services revenue was up 17%, profit up 9%. And we signed $15.4 billion of new business, and importantly short term signings were up 8%.
They have also benefited from having a truly global operation, which enables them to focus on emerging markets, that drew in a 3rd of their revenue for the quarter. You can expect a similar set of results from Google (growth, but at a much slower rate) and from other geographically diverse companies who can limit their exposure to the carnage that we will see this year in the US market. Google itself crossed the crucial landmark a while ago, when, in Q1 2007, their international revenues pretty much hit 50% of their total revenue.
Once again, companies that will take a huge hit are ones like Apple, who depend extensively on retail spending in the US markets, which is why they have been gradually moving into other segments (iPhone) for which you can look at recurring revenues per customer than a one time engagement. 2008 will be critical for Apple and if they have to escape the carnage, they have no choice but to forge ahead with the launch of the iPhone in other markets.
Then again, the iPhone is vastly overpriced for a market like India, even if you were to assume something like INR 16,000 as the price point. If they need a winner, they’ll need something in the sub-INR 10,000 price range to set the market alight and I don’t see something like that coming from Apple.
On an unrelated parting note, I think I’ve linked to David Manners’ blog on the semiconductor trade, but it is an absolutely lovely blog to read even if you are not a semiconductor wonk. Highly suggested.