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Patent filing describes IBM's new offshoring math

Application details mathematical model for assessing 'global resource sourcing'

March 30, 2009 12:00 PM ET

Computerworld - IBM last week filed a patent application for an offshore outsourcing methodology that is intended to help companies minimize the financial risks associated with sending work overseas.

The patent application describes a computer-driven approach for putting values on both the quantitative and qualitative attributes of a "global resource sourcing strategy." For instance, the methodology takes into account the language skills and morale of offshore workers, as well as a list of the hard numbers involved in setting up an offshore operation, including labor rates and currency valuations.

In short, IBM is attempting to reduce offshoring considerations to a mathematic model — or, in the words of the application, "a robust and reusable sourcing template" for identifying and analyzing "global resource pools."

For IBM itself, the patent filing couldn't be any timelier. The company submitted the application to the U.S. Patent & Trademark Office last Thursday, the same day it confirmed that it is eliminating more jobs in its North American operations.

IBM didn't disclose any details about the planned cutbacks, but Alliance@IBM, a union local that isn't recognized as an official bargaining unit, has said it expects between 4,000 and 5,000 workers to be let go. The union thinks the cuts are part of a plan by IBM to send more jobs overseas, following an earlier round of reductions in January.

In the patent application, IBM said the described methodology "allows decision-makers to conveniently trade off one or more qualitatively defined levels between one or more factors in terms of quantifiable, direct, costs."

The methodology also looks at some scary assumptions as part of its mathematical models — scary, that is, if you're a U.S.-based IT worker. In a hypothetical assessment, the application sets up an example that includes a company having "50% of resources in China by 2010."

Here's an example of the specific metrics that the methodology takes into account:

  1. Suppose that employees hired in country A possess level 1 communication skills, while employees in country B possess level 2 skills.
  2. Additionally, suppose that the job satisfaction of employees hired in country A is rated to be at level 2, while that of employees hired in country B is rated at level 1. In this case, a lower score implies higher job satisfaction.
  3. Since communication skill levels and job satisfaction levels can't be directly compared, it's useful to quantify in terms of cost the differences between the levels, both within the same factor and across different ones.

The patent application explains why IBM thinks it's important to look at a broad range of variables when making global sourcing decisions. By simply looking at wages and material costs, "the organization may indirectly increase other costs such as those associated with poorer quality workers and/or materials," IBM said. That could include loss of customers, lower productivity, increased product returns and higher worker attrition, the company said, adding that a company "needs to consider both direct and indirect costs associated with its resources."

This isn't the first time that IBM has filed for a patent related to an offshoring methodology. An application filed in 2007 described a software-driven approach "for identifying at least a portion of a human-resource within an organization for outsourcing."

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