Outsourcing vendor ACS to move 'higher-level' IT jobs offshore

Execs say firm plans to start offshoring development, project management work

IT workers and managers who believe their jobs are at too high a level to be sent overseas may want to look at Affiliated Computer Services Inc.'s plan to boost its offshore outsourcing operations by moving "more complex, higher paying" jobs to countries outside the U.S.

Dallas-based ACS, which provides IT and business process outsourcing services to a wide range of corporate and government clients, currently employs about 63,000 people, 20,000 of them in low-cost offshore locations. But in a conference call last Thursday on its financial results for the quarter that ended Sept. 30, ACS detailed plans to increase the number of employees working offshore by 4,200 during its current fiscal year, which began July. (A transcript of the call can be read on Seeking Alpha Ltd.'s Web site.)

"To have a greater financial impact, we will be moving a higher percentage of more complex, higher paying jobs offshore, including management and application development roles," ACS President and CEO Lynn Blodgett said during the call.

ACS has been gradually shifting jobs to offshore and near-shore centers in the Philippines, Mexico, Jamaica, Guatemala and India. In its 2006 fiscal year, just under 25% of the company's workforce was based outside of the U.S. Now, nearly 35% of its workers are overseas, according to a presentation used by ACS officials during the conference call (download PDF — see slide 14).

Tom Burlin, chief operating officer at ACS, filled in some of the details about the jobs that will be affected by the additional offshore moves. "We've done a great job in moving base production-level jobs offshore but have decided," he said, "to aggressively move more of our higher-level jobs, like production managers, higher-level back-office functions and higher-level development roles, to lower-cost locations."

The company said the expected savings from offshoring will give ACS more money to invest in areas such as sales, innovation and development of new products. "This is the right thing to do and the right time to do it," Blodgett said. "This investment will make us stronger, not only during this economic storm, but for years to come."

"High-level jobs are just as vulnerable [to offshoring] as mid- and low-level jobs," said Ron Hira, an assistant professor of public policy at the Rochester Institute of Technology and co-author of the book Outsourcing America. Every IT services firm, big or small, is shifting more advanced technology jobs offshore, Hira said.

"For U.S. IT workers, look out: You're not going to be safe," he added. "The Wall Street analysts will be pushing companies even more to accelerate their offshoring projects. This is just the beginning of a shift of technological capabilities to low-cost countries." The relocation of jobs, Hira claimed, is being "aided and abetted by horrible U.S. public policies that subsidize these shifts."

An ACS spokesman said it's too early to know whether the company's new offshoring moves will lead to layoffs of U.S. workers. The IT services firm's business continues to expand, he pointed out. But slide 19 of the conference call presentation shows that ACS is estimating $38 million to $42 million in "severance/transition transition" expenses as a result of the increased offshore activity, with as much as $25 million of that total expected to come during the company's ongoing second fiscal quarter.

ACS, which reported $6.16 billion in revenue for its 2008 fiscal year, does a significant amount of IT work for government agencies: about 40% of its business comes from government contracts. But most of the offshore work is being done for corporate clients, according to the ACS spokesman. The company has more flexibility to move corporate work offshore than government contracts often allow, he said.

In a separate move, pharmaceutical maker Pfizer Inc. detailed cost-reduction strategies in an earnings call last month and said it had "a wide array of outsourcing opportunities in various stages of implementation." That included projects within its manufacturing, logistics, finance, facilities, legal and IT departments, according to a transcript of the call posted on the Seeking Alpha site.

Citing unidentified sources, The Day, a newspaper in New London, Conn., today reported that over the past few months, Pfizer has been training foreign workers at facilities in New London and Groton, Conn., in preparation for transferring much of its IT work from locally employed contractors to outside firms.

A Pfizer spokeswoman said the company wouldn't comment about the Day's story. In regard to Pfizer's use of contract workers, the company said via e-mail that the number of its temporary workers "ebbs and flows." For instance, Pfizer said that on an average day, it has 800 to 1,000 contract workers at its sites in Groton and New London, in addition to the 5,400 company employees there. The contractors provide services "ranging from janitorial and cafeteria services to clerical and technical work," Pfizer said.

Copyright © 2008 IDG Communications, Inc.

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