Outsourcing back ?

Starts off with statement about 'many' jobs are coming back to the West ... but NOTHING in the remaining article indicates this is happening ... at all .... 'some' grads turning down Google for India ... then, just one anecdote is mentioned ... not exactly a trend

September 25, 2007

Outsourcing Works, So India Is Exporting Jobs

By ANAND GIRIDHARADAS

MYSORE, India — Thousands of Indians report to Infosys Technologies’ campus here to learn the finer points of programming. Lately, though, packs of (by 'packs of' does he mean 'some') foreigners have been roaming the manicured lawns, too.

Many ('many' = 'a few') of them are recent American college graduates, and some (here 'some' seems to = 'one') have even turned down job offers from coveted employers like Google. Instead, they accepted a novel assignment from Infosys, the Indian technology giant: fly here for six months of training, then return home to work in the company’s American back offices.

India is outsourcing outsourcing.

One of the constants of the global economy has been companies moving their tasks — and jobs — to India. But rising wages and a stronger currency here, demands for workers who speak languages other than English, and competition from countries looking to emulate India’s success as a back office — including China, Morocco and Mexico — are challenging that model.

Many executives here acknowledge that outsourcing, having rained most heavily on India, will increasingly sprinkle tasks around the globe. Or, as Ashok Vemuri, an Infosys senior vice president, put it, the future of outsourcing is “to take the work from any part of the world and do it in any part of the world.”

To fight on the shifting terrain, and to beat back emerging rivals, Indian companies are hiring workers and opening offices in developing countries themselves, before their clients do.

In May, Tata Consultancy Service, Infosys’s Indian rival, announced a new back office in Guadalajara, Mexico; Tata already has 5,000 workers in Brazil, Chile and Uruguay. Cognizant Technology Solutions, with most of its operations in India, has now opened back offices in Phoenix and Shanghai. (at least Phoenix is US .. jobs moving 'back' ??)

Wipro, another Indian technology services company, has outsourcing offices in Canada, China, Portugal, Romania and Saudi Arabia, among other locations. (Canada , close enough !)

And last month, Wipro said it was opening a software development center in Atlanta that would hire 500 programmers in three years. (bingo! 500 jobs in 3 years ... wish he would contrast this added employment with their growth elsewhere in the world ... this would be insignificant, and due to the economics, might never come to fruition)

In a poetic reflection of outsourcing’s new face, Wipro’s chairman, Azim Premji, told Wall Street analysts this year that he was considering hubs in Idaho and Virginia, in addition to Georgia, to take advantage of American “states which are less developed.” (India’s per capita income is less than $1,000 a year.) (considering is not 'doing' ... also per capita Indian income is meaningless ... more relevant is per capita IT workers in India , probably somewhere between $15K - $30 depending on the type of work and amortized per capita)

For its part, Infosys is building a whole archipelago of back offices — in Mexico, the Czech Republic, Thailand and China, as well as low-cost regions of the United States. (Infosys is doing this for 2 reasons 1) low pay because no other alternative jobs available , and 2) low attrition rate, hopefully ... and normally these are low-end, low-pay jobs to begin with , i.e. mostly call-centers ... being done because of backlash due to communications problems with Indian based call centers) ...

The company seeks to become a global matchmaker for outsourcing: any time a company wants work done somewhere else, even just down the street, Infosys wants to get the call.

It is a peculiar ambition for a company that symbolizes the flow of tasks from the West to India.

Most of Infosys’s 75,000 employees are Indians, in India. They account for most of the company’s $3.1 billion in sales in the year that ended March 31, from work for clients like Bank of America and Goldman Sachs.

“India continues to be the No. 1 location for outsourcing,” S. Gopalakrishnan, the company’s chief executive, said in a telephone interview.

And yet the company opened a Philippines office in August and, a month earlier, bought back offices in Thailand and Poland from Royal Philips Electronics, the Dutch company. In each outsourcing hub, local employees work with little help from Indian managers.

Infosys says its outsourcing experience in India has taught it to carve up a project, apportion each slice to suitable workers, double-check quality and then export a final, reassembled product to clients. The company argues it can clone its Indian back offices in other nations and groom Chinese, Mexican or Czech employees to be more productive than local outsourcing companies could make them.

“We have pioneered this movement of work,” Mr. Gopalakrishnan said. “These new countries don’t have experience and maturity in doing that, and that’s what we’re taking to these countries.”

Some analysts compare the strategy to Japanese penetration of auto manufacturing in the United States in the 1970s. Just as the Japanese learned to make cars in America without Japanese workers, Indian vendors are learning to outsource without Indians, said Dennis McGuire, chairman of TPI, a Texas-based outsourcing consultancy. (only problem is that this analogy doesn't hold AT ALL ... Japanese cars are now assembled in US ... the work that left India is NOT returning to the US, but going to other low-cost countries )

Though work that bypasses India remains a small part of the Infosys business, it is growing. The company can be highly secretive, but executives agreed to describe some of the new projects on the condition that clients not be identified.

In one project, an American bank wanted a computer system to handle a loan program for Hispanic customers. The system had to work in Spanish. It also had to take into account variables particular to Hispanic clients: many, for instance, remit money to families abroad, which can affect their bank balances. The bank thought a Mexican team would have the right language skills and grasp of cultural nuances.

But instead of going to a Mexican vendor, or to an American vendor with Mexican operations, the bank retained three dozen engineers at Infosys, which had recently opened shop in Monterrey, Mexico.

Such is the new outsourcing: A company in the United States pays an Indian vendor 7,000 miles away to supply it with Mexican engineers working 150 miles south of the United States border. (not sure how this is different or new from US using Mexican subsidiary for Latin contracts ... what's so new about this ?)

In Europe, too, companies now hire Infosys to manage back offices in their own backyards. When an American manufacturer, for instance, needed a system to handle bills from multiple vendors supplying its factories in different European countries, it turned to the Indian company. The manufacturer’s different locations scan the invoices and send them to an office of Infosys, where each bill is passed to the right language team. The teams verify the orders and send the payment to the suppliers while logged in to the client’s computer system.

More than a dozen languages are spoken at the Infosys office, which is in Brno, Czech Republic.

The American program here in Mysore is meant to keep open that pipeline of diversity.

Most trainees here have no software knowledge. By teaching novices, Infosys saves money and hopes to attract workers who will turn down better-known companies for the chance to learn a new skill.

“It’s the equivalent of a bachelor’s in computer science in six months,” said Melissa Adams, a 22-year-old trainee. Ms. Adams graduated last spring from the University of Washington with a business degree, and rejected Google for Infosys. ( sounds like she failed the 'sanity test' ... turned down Google chance to learn 6 months of programming/IT skills ??)

And yet, even as outsourcing takes on new directions, old perceptions linger.

For instance, when Jeff Rand, a 23-year-old American trainee, told his grandmother he was moving to India to work as a software engineer for six months, “she said, ‘Maybe I’ll get to talk to you when I have a problem with my credit card.’ ”

Said Mr. Rand with a rueful chuckle, “It took me about two or three weeks to explain to my grandma that I was not going to be working in a call center.” (don't be so sure ... you may be managing one in a low-cost area of the US !!)

New push for more H-1B

Political and corporate push to get more H-1B workers because of a 'severe shortage' . Where else is there a severe shortage of any commodity but no concommitant rise in the cost of that commodity. If they need 'talented' (does this mean 'foreign') workers then they could get talented workers if they paid more. Market forces should prevail and technical workers would start commanding 'tech-bubble' year 2000 salaries and college students would be overwhelming their comp sci depts like they did then .

Wanted: Foreign tech workers

Congress faces pressure to raise the number of visas for temporary employees.

By Eilene Zimmerman, FSB contributor

September 26 2007: 6:42 AM EDT

FSB -- When Elizabeth Charnock couldn't find the talent she needed to keep her small Silicon Valley (high cost of living requiring high people costs) software company Cataphora (catphora.com) growing, she looked for workers overseas. Finding the skilled employees she sought, the CEO applied for eight H1B visas for fiscal 2008. The documents enable foreigners with technical skills to work temporarily in the U.S.

"We did everything you're supposed to do," says Charnock. "We hired an immigration lawyer, we filed the first day. It went into a lottery. Five of our eight hires got visas." Two of the three that didn't had already sold their homes to move to California from Europe. "Their lives were turned upside down. They are stuck," adds Charnock, "and so are we. The competition for these people here is insane." (from Europe! this is an unusual path .. would be interesting to know if these were native Europeans or Asian immigrants doing H-1B type work in Europe ... Europe might be new 'training league' for US ?)

Being able to get H-1B visas for needed workers is essential for small companies, she says. "It levels the playing field," she says. (does this mean 'cheaper labor costs allow us to compete'?)

Charnock is one of a groundswell of entrepreneurs and advocates for immigrants who say Congress needs to raise the cap on H-1B visas to help the economy. Last week 1,000 protestors-mostly legal immigrants-drew attention to the situation of highly skilled foreigners who want to work for companies in the U.S. by marching on Capitol Hill.

The demonstrators said that potential employees-who are needed in growing fields such as engineering and software development-are being shut out because of a lack of H-1B visas. According to the protesters, if the U.S. does not accept more foreign workers with skills in math, engineering and computer science, the nation risks losing ground in the global economy, because the computer scientists who can't find work in the U.S. will go to work for economic rivals. (part of the lack of H-1B availability are the head-hunting agencies that grab up most of the visas on opening day ... they then control the human traffic and further lower the real wages that the immigrants receive) .

Governors from 13 states are now weighing in on the issue. California's Arnold Schwarzenegger, Deval Patrick of Massachusetts, and New York's Eliot Spitzer, were among those who signed a Sept. 11 letter (http://gov.ca.gov/index.php?/press-release/7381/) to Senate Majority Leader Harry Reid, House Speaker Nancy Pelosi, Senate Minority Leader Mitch McConnell and House Minority Leader John Boehner urging them to raise the cap on the number of H1-B visas, which the governors say was set "arbitrarily" and today "bears no relation to our economy." (note that the 3 governors listed here are from high-tech states, California, NY and Mass, with significant high-tech corps lobbying these governments)

The H-1B program has its critics, including U.S.-born programmers, who say the visas serve mainly to drive down salaries of American tech workers. Some employers also question the value of the H-1B program. Miles Thomason, CEO of Levia Softwar (leviasoftware.com), a four-person company in Atlanta, says that when other companies hire H1-B workers and pay them a lower wages than Thomason pays his American workers, he loses competitiveness. He has tried to hire foreign-born programmers, but has not had positive experiences: "On paper they look good but the interviews don't go well," he says. "Communication issues alone are problematic for us." (this is the almost universal experience of users of the program , from the people who are close to the ground , people who interface with the hires, like this guy with just a 4 person company)

Should the U.S. raise the cap on H-1B visas? Comment here.

Nonetheless, many in the technology community (does this mean coporate lobbyists , immigration lawyers and immigrant advocate orgs ?) have complained for years about the shortage of qualified American job seekers. They (ubiquitous) have been pushing Congress to raise the cap on the number of H-1B visas granted each year. The current cap of 65,000, set by Congress in 1990, was raised to 195,000 from 2001-2003. It wasn't until 1997 that the number of applications exceeded the H1B cap, according to USCIS spokesperson Marie Sebrechts. On April 2, the first day for applying for visas for fiscal 2008, the USCIS received more than 130,000 applications, forcing the agency - for the first time - to put all applications into a computer-generated selection process similar to a lottery.

American-born workers do not seem to be rushing to gain the skills that technology companies want.( and why would that be?) Only about 13 percent of graduate degrees awarded in the U.S. are science degrees, according to the most recent numbers from the National Center for Education Statistics (http://nces.ed.gov/programs/digest/d05/tables/dt05_405.asp?referrer=report). And foreign nationals make up about 60 percent of the Ph.D.s in computer science and engineering coming out of U.S. colleges, according to an analysis of education statistics by the American Association for the Advancement of Science (aaas.org).

Across the tech industry, the inability to hire qualified non-citizens is beginning to pinch. One-third of private, venture capital-backed companies surveyed by the National Foundation for American Policy (nfap.com) for the National Venture Capital Association (nvca.org) last November said the lack of visas had influenced their decision to place more personnel in facilities abroad. (the old threat ... but they are going to do this anyway ... why bring the person here if the same person can do the job just as well overseas for 1/3rd the cost ?) Among respondents using H1-B visas, nearly 40 percent said the cap has "negatively impacted their company when competing against other firms globally." (they need some excuse for not succeeding to their own hype )

Hardest hit by the cap may be the nation's small businesses, which often don't have the resources to open up satellite operations in places such as India and China, where they could hire skilled technical workers, says Russell Swapp, a Boston-based partner who heads the national immigration team at law firm Seyfarth Shaw (http://www.seyfarth.com). "I have smaller clients who have been unable to meet their hiring targets because of the cap and feel they are being competitively crippled," he says. (quoting an immigration lawyer , obviously unbiased . And complaining for the mom-n-pop small businesses , those small 5 person computer firms that need to get overseas people! Why don't they find out how many of these workers are actually working for small businesses now , after the last 15 years of the program)

Foreign-born engineers and computer scientists have been critical to growth and innovation in the U.S., according to a study by The Kauffman Foundation (kauffman.org), Duke University, New York University and Harvard. The study estimates that immigrants founded one in four of the engineering and technology companies created between 1995 and 2005. By 2006, these companies were employing 450,000 workers and generating $52 billion in revenue, according to the researchers. "These [founders] are often true innovators and own the intellectual property on which companies are based," says Swapp. "These aren't fungible positions." ( a net gain for the US ?? ... were these 450,000 workers American ? or more H-1B workers or workers actually working overseas for the parent 'US' firm ? another couple of simple questions to ask ... also there are perhaps a million or more high-tech immigrants in US and they only created 25% of the new companies ? ... the vast majority of these new companies were created not by the workers but by graduate students at universities, not workers brought in via H-1B)

This summer, hope for raising the cap evaporated when Congress failed to enact a comprehensive immigration reform bill in late June, which included a provision to increase the number of H1B visas to 115,000. A senior House aide familiar with the H-1B issue said House leaders are now in the process of "trying to figure out what parts of immigration reform can move forward with support." On the Senate side, Charles Schumer of New York, Maria Cantwell of Washington State and other democrats and republicans "are working on legislation to reform the H1B system," says a spokesperson in Schumer's office. And President Bush has repeatedly said he wants Congress to raise the cap. (George 'open borders' Bush)

But even if Congress does provide more H1B visas, it will not solve the larger problem of a growing skills gap in the U.S. workforce. "It isn't just that there aren't enough Americans graduating in the math and science fields, it's also that there is a need for these people across the globe, and everyone is fighting for them," says Stuart Anderson, executive director of the NFAP and a former staff director of the Senate Immigration Subcommittee (http://judiciary.senate.gov/subcommittees/immigration109.cfm). "The question is whether or not the hiring takes place inside the U.S., keeping growth and innovation here, or someplace else." ( a straw man argument ... most high-tech will be done overseas within 5 years due to the easy ability to do such work anywhere in the world along with the economic incentive to move jobs offshore ... becoming an unemployed engineer in the US doesn't help the person or the economy one whit )

Gov't subsidization of ANY program - Medicare fraud

When the gov't is brought in to subsidize ANY program (e.g. homeowners allowed to reduce their taxes with the interest paid on mortgages ) :

- There is no incentive for the service-sellers to decrease their prices, but just the opposite
they can now increase prices because the customer is paying less (gov't picking up part of tab) .

- Oversight of programs is difficult for a number of reasons, so the opportunity for fraud and corruption increases exponentially.

BTW, how come medicare , a program designed for senior citizens, is being billed so much for HIV/AIDS, which is a younger person's disease in general ?


Article published Sep 21, 2007
South Florida bills billions for HIV

September 21, 2007

By Jim McElhatton - Doctors and clinics in three Southern Florida counties account for most of the billions of dollars charged to Medicare nationwide for HIV and AIDS drugs and services, billing records show.

Federal health care regulators call the lopsided billing patterns "egregious" and warn that South Florida — particularly Broward, Miami-Dade and Palm Beach counties — is a potential hotbed for health care fraud, waste and abuse.

"It"s all ultimately part of the money-driven, underground economy in Miami," said Benson B. Weintraub, a health care fraud lawyer based in Fort Lauderdale.

According to a report this week by the Inspector General for the U.S. Department of Health and Human Services, health care providers in Broward, Miami-Dade and Palm Beach submitted $2.5 billion in claims to Medicare on behalf of HIV/AIDS patients in 2005.

By contrast, providers in the rest of the country submitted less than $1 billion in claims combined.

Suspected scams, which involve the recruitment of patients, kickbacks and unnecessary medical services, aren"t limited to HIV clinics.

In March, federal inspectors found dozens of wheelchair and electric scooter suppliers in Florida that ran afoul of federal rules, including phantom operations that billed the government but had no bricks-and-mortar locations.

"Medicare continues to be highly vulnerable to fraud and abuse and immediate steps must be taken," Inspector General Daniel R. Levinson said of his office"s findings.

Mr. Levinson"s report also found that Medicare officials and contractors could not provide a "clinical explanation" for the high level of billing.

One common HIV/AIDS scam involves doctors and clinics employing "runners" who recruit HIV and AIDS patients, then pay kickbacks if patients get unneeded medical treatment. In turn, crooked providers bill Medicare for the services.

After getting shut down, some providers open different clinics under a new corporate name.

In a written response to Mr. Levinson"s report, Herb B. Kuhn, acting deputy administrator for Centers for Medicare and Medicaid Services (CMS), said Medicare officials have taken "aggressive recent actions" to crack down on fraud.

Though provider billings for HIV/AIDS in Southern Florida have increased from $1.5 billion in 2004 to $3.3 billion in 2006, CMS is getting tougher scrutinizing claims before providing reimbursement, Mr. Kuhn wrote.

In 2004, he wrote, Medicare reimbursed 66 percent of all claims and paid out $1 billion. But in 2006, CMS paid $890 million, approving just 27 percent of all claims submitted.

"In fact, many of the providers with aberrant billing activity ... were referred to law enforcement and are now facing prosecution," Mr. Kuhn wrote.

Mr. Weintraub said the federal court in Southern Florida has a reputation among lawyers as "the health care fraud capital of the United States." He said a host of factors contribute to the problem.

The fraud often happens in disenfranchised communities and sometimes involves "illegal residents because they"re paid cash for virtually no labor, and that in my view is a very degrading and exploitative practice," Mr. Weintraub said.

Federal authorities said they"re increasing efforts to investigate and prosecute fraud. In April, the FBI and U.S. Attorney"s Office for the Southern District of Florida announced the arrests of 10 owners of HIV clinics and medical-equipment dealers on money-laundering charges.

One company, Coral Way Professional Health Services Inc., was charged with giving kickbacks to patients. At the clinics, workers injected the patients with a saline solution but later billed Medicare for actual prescribed drugs, authorities said.

A federal task force aimed at rooting out Medicare fraud has resulted in 34 criminal cases involving a combined $142 million in Medicare bills in Southern Florida, authorities said.

R. Alexander Acosta, U.S. Attorney for the Southern District of Florida, yesterday called the federal task force "a critical part of our continuing resolve to safeguard the Medicare program." He said health care prosecutions have increased nearly 50 percent compared with last year.

Investigators are largely focusing on infusion therapy and medical equipment dealing schemes, Jonathan I. Solomon, special agent in charge of the FBI"s Miami field office, said yesterday. Infusion therapy mostly deals with medication given intravenously or through a feeding tube.

HIV/AIDS billing scams have been occurring for years in Southern Florida. In 2005, the state Board of Medicine convened a meeting to discuss the problem.

Meeting minutes show that officials learned of one clinic that had been treating automobile injuries but switched to HIV/AIDS cases because of the potential for high billing. The owner had no medical license and paid patients up to $500 to visit the clinic.

Mattel , a US firm ?

Extraordinary ...

Chinese subcontracted firms substitute lead paint because it is significantly cheaper, thereby endangering the health of children world-wide and breaking US laws, and Mattel apologizes to them !?

A 'design flaw' ? Mattel 'designed' the toy to use lead paint ?

US firms can get so beholden to cheap labor and high profits that they will cede control of their corporations to their overseas subcontractors. So who's in charge of the company? What US firm apologizes to it's US subcontractor when that subcontractor makes a mistake ?

What does this mean for Boeing and the other significantly large 'US firms' now subcontracting large parts of their manufacturing, design and test in China and elsewhere?

Large profit margins are as addictive as crack, and an addict soon loses all self-respect in pursuing his addiction.

Mattel apologizes to China for toy recalls

Toy manufacturer takes 'full responsibility' for three worldwide recalls involving more than 21 million toys, citing design flaws.

September 21 2007: 7:33 AM EDT

BEIJING (AP) -- U.S.-based toy giant Mattel issued an extraordinary apology to China on Friday over the recall of Chinese-made toys, taking the blame for design flaws and saying it had recalled more lead-tainted toys than justified.

The gesture by Thomas A. Debrowski, Mattel's executive vice president for worldwide operations, came in a meeting with Chinese product safety chief Li Changjiang, at which Li upbraided the company for maintaining weak safety controls.

"Our reputation has been damaged lately by these recalls," Debrowski told Li in a meeting at Li's office at which reporters were allowed to be present.

"And Mattel takes full responsibility for these recalls and apologizes personally to you, the Chinese people, and all of our customers who received the toys," Debrowski said.

Mattel (Charts, Fortune 500) ordered three high-profile recalls this summer involving more than 21 million Chinese-made toys, including Barbie doll accessories and toy cars because of concerns about lead paint and tiny magnets that could be swallowed.

The recalls have prompted complaints from China that manufacturers were being blamed for design faults introduced by Mattel.

On Friday, Debrowski acknowledged that "vast majority of those products that were recalled were the result of a design flaw in Mattel's design, not through a manufacturing flaw in China's manufacturers."

Lead-tainted toys accounted for only a small percentage of all toys recalled, he said, adding that: "We understand and appreciate deeply the issues that this has caused for the reputation of Chinese manufacturers."

In a statement issued by the company, Mattel said its lead-related recalls were "overly inclusive, including toys that may not have had lead in paint in excess of the U.S. standards.

"The follow-up inspections also confirmed that part of the recalled toys complied with the U.S. standards," the statement said.

Li reminded Debrowski that "a large part of your annual profit... comes from your factories in China.

"This shows that our cooperation is in the interests of Mattel, and both parties should value our cooperation. I really hope that Mattel can learn lessons and gain experience from these incidents," Li said, adding that Mattel should "improve their control measures."

Since this summer's recall, Mattel has announced plans to upgrade its safety system by certifying suppliers and increasing the frequency of random, unannounced inspections. It has fired several manufacturers.

Tests had found that lead levels in paint in recalled toys were as high as 110,000 parts per million, or nearly 200 times higher than the accepted safety ceiling of 600 parts per million.

China has become a center for the world's toy-making industry, exporting $7.5 billion worth of toys last year.

Oracle had good quarter, so did it's Execs

When is $1.25 billion considered a tremendous cost? When it is the cost of 12,000 employee's wages and benefits.

When is a $1.25 billion cost not even worth mentioning? When it is the cost of stock options given to a handful of execs who are already earning millions without it.

'The Redwood Shores-based company said Thursday it earned $840 million, or 16 cents per share, for the three months ended Aug. 31. ..... If not for stock-option expenses, Oracle (Charts, Fortune 500) said it would have made 22 cents per share .... '

Do a little math on this :

$840million / .16 = 5.25 billion shares
5.25 billion shares x .06 cents (cost of options per share) = $315 million in options , for just one quarter !!!

That's about $1.25 billion in option costs for a year , the vast majority of it going to just a few top execs, as is the case in most corporations ... money taken from shareholders and company re-investments , eliciting barely a yawn.

Starts adding up to real money ... let's turn this around ... if they were struggling and announced that they were laying off 12,000 workers to save $1.25 billion, this would be considered a giant number and a great savings, and the stock would undoubtedly rise ... but spending the majority of this large number on a handful of execs and it's not significant . Wall Street considers it a good investment to retain 'top people' .

Oracle profits beat expectations

Business software maker reports earnings of 22 cents per share before a charge, beating analysts' estimates by a penny per share.

September 20 2007: 6:26 PM EDT

SAN FRANCISCO (AP) -- Oracle Corp. kicked off its new fiscal year with its biggest increase in software sales since the dot-com boom and bust - highlighting a first-quarter performance that topped analysts' and its own expectations.

The Redwood Shores-based company said Thursday it earned $840 million, or 16 cents per share, for the three months ended Aug. 31. That represented a 25 percent improvement from net income of $670 million, or 13 cents per share, at the same time last year.

If not for stock-option expenses, Oracle (Charts, Fortune 500) said it would have made 22 cents per share - a penny above the average estimate among analysts polled by Thomson Financial.

Revenue for the period totaled $4.53 billion, 26 percent above last year's $3.59 billion and well above the average analyst estimate of $4.34 billion. If not for a weak dollar that bolstered international sales, Oracle said its first-quarter revenue would have been up by 22 percent.

Perhaps most important to investors, Oracle's sales of new software licenses climbed 35 percent to $1.09 billion, soaring past both management and analysts' projections. Analysts had been anticipating an improvement in the mid-20 percent range.

The spike was the largest in Oracle's first-quarter software sales since free-spending Internet startups were driving demand in 2000, said Safra Catz, the company's chief financial officer.

The first-quarter gains included about $87 million in sales from two recently acquired companies, Hyperion Corp. and Agile Software Corp., whose products weren't sold by Oracle last year.

Wall Street focuses on software sales because the new licenses establish a pipeline for future revenue from product upgrades and maintenance.

Oracle shares reached a new 52-week high of $21.31 Thursday before falling back to finish the regular session at $21.04. The stock surged by 43 cents in extended trading after the company released its first-quarter report.

Catz predicted Oracle's momentum will continue in the current quarter. She forecast the company's software sale will rise by 15 percent to 25 percent in the three months ending in November to produce earnings of 26 cents or 27 cents per share, excluding stock option expenses.

The first quarter is usually Oracle's weakest sales period because so many key decision-makers take summer vacations.

"If things weren't going well, this is where you would see it," Catz told analysts during a Thursday conference call.

August looked like it might be even more challenging this year as a worsening credit crunch triggered by the slumping real estate market roiled the stock market and raised concerns about both consumers and businesses curtailing their spending.

But the worries apparently didn't stop companies, schools and government agencies from buying Oracle's software.

The first-quarter performance extended a prosperous stretch that has justified an expensive expansion launched in 2004.

Hoping to build upon the company's dominance in database software, Oracle has spent about $25 billion on more than 30 acquisitions in the past three years. The shopping spree has primarily been aimed at luring customers away from SAP AG, the leading seller of business-applications software that helps companies manage their operations.

During the first quarter, Oracle's sales of applications software rose 65 percent to $376 million.

Oracle also is making significant inroads in middleware software - coding that helps the applications to work more effectively with the database software. The company's sales of database and middleware software increased 23 percent during the first quarter to $711 million.

"I would say that in the last 12 months, Oracle has certainly established itself as a much more viable software provider," said AMR Research analyst Bruce Richardson.

Lotus Symphony vs Microsoft Office

The NYTimes always writes positive articles about IBM, both being NY State (really, NYC) firms.

It's hard to see how this helps IBM as far as revenue since it's free .... if it makes a dent , large or small, in Office , this just hits Microsoft's bottom-line and doesn't enhance IBM's at all ... A weaker Microsoft is less able to compete in other software/hardware areas where perhaps IBM could gain market-share and revenues .

This is also another example of IBM no longer offering it's own software alternatives in the marketplace, which takes a lot of time and money to develop and maintain, but instead offers open-source freeware which requires a significantly smaller cost and takes advantage of the output of developers who work for free .

It's hard to see how the LINUX push has been that much of a success . IBM started to back it seven years ago and while it has gained market share from Microsoft it is still a small piece of the market at this point in time . If this was a proprietary OS, after seven years it might not be offered anymore. OS/2 didn't survive 7 years in the market .

September 18, 2007

I.B.M. to Offer Office Software Free in Challenge to Microsoft’s Line

By STEVE LOHR

I.B.M. plans to mount its most ambitious challenge in years to Microsoft’s dominance of personal computer software, by offering free programs for word processing, spreadsheets and presentations.

The company is announcing the desktop software, called I.B.M. Lotus Symphony, at an event today in New York. The programs will be available as free downloads from the I.B.M. Web site.

I.B.M.’s Lotus-branded proprietary programs already compete with Microsoft products for e-mail, messaging and work group collaboration. But the Symphony software is a free alternative to Microsoft’s mainstay Office programs — Word, Excel and PowerPoint. The Office business is huge and lucrative for Microsoft, second only to its Windows operating system as a profit maker.

In the 1990s, I.B.M. failed in an effort to compete head-on with Microsoft in personal computer software with its OS/2 operating system and its SmartSuite office productivity programs.

But I.B.M. is taking a different approach this time. Its offerings are versions of open-source software developed in a consortium called OpenOffice.org. The original code traces its origins to a German company, Star Division, which Sun Microsystems bought in 1999. Sun later made the desktop software, now called StarOffice, an open-source project, in which work and code are freely shared.

I.B.M.’s engineers have been working with OpenOffice technology for some time. But last week, I.B.M. declared that it was formally joining the open-source group, had dedicated 35 full-time programmers to the project and would contribute code to the initiative.

Free office productivity software has long been available from OpenOffice.org, and the open-source alternative has not yet made much progress against Microsoft’s Office.

But I.B.M., analysts note, has such reach and stature with corporate customers that its endorsement could be significant.

“I.B.M. is jumping in with products that are backed by I.B.M., with the I.B.M. brand and I.B.M. service,” said Melissa Webster, an analyst for IDC, a research firm. “This is a major boost for open source on the desktop.”

I.B.M. executives compare this move with the push it gave Linux, the open-source operating system, into corporate data centers. In 2000, I.B.M. declared that it would forcefully back Linux with its engineers, its marketing and its dollars. The support from I.B.M. helped make Linux a mainstream technology in corporations, where it competes with Microsoft’s Windows server software.

I.B.M. is also joining forces with Google, which offers the open-source desktop productivity programs as part of its Google Pack of software. Google supports the same document formats in its online word processor and spreadsheet service.

I.B.M. views its Symphony desktop offerings as part of a broader technology trend that will open the door to faster, more automated movement of information within and between organizations.

A crucial technical ingredient, they say, is the document format used in the open-source desktop software, called the OpenDocument Format. It makes digital information independent of the program, like a word processor or spreadsheet, that is used to create and edit a document. OpenDocument Format is based on an Internet-era protocol called XML, short for Extensible Markup Language, which enables automated machine-to-machine communication.

For example, an individual investor might create a spreadsheet with automated links to market information, and prices at which he or she wants to buy or sell shares in particular stocks. The person would get an alert by e-mail or cellphone message of price swings, and could create the document for a buy or sell order with a keystroke.

Or, in a doctor’s office, patient records could be linked to hospital, clinic and other databases and updated automatically.

Microsoft has the same vision of software automation, but it champions its own document format, called Office Open XML. Earlier this month, Microsoft failed in its initial effort to have Office Open XML ratified as a global technical standard by the International Organization for Standardization in Geneva. The OpenDocument Format, backed by I.B.M., Google, Sun and others, was approved by the standards organization last year.

I.B.M. clearly regards its open-source desktop offerings as a strategic move in the document format battle. “There is nothing that advances a standard like a product that uses it,” said Steven A. Mills, senior vice president of I.B.M.’s software group.

The Lotus Symphony products will support the Microsoft Office formats as well as the OpenDocument Format. But analysts note that technical translators are not entirely foolproof; Symphony software may easily translate the words from a Microsoft Word document, but some of the fonts and formatting may be lost. For many users, that may not matter, they say, but for others it might.

Betsy Frost, a general manager in Microsoft’s Office business, said users valued “full compatibility” with previous versions of their Office documents as well as the ease of use and familiarity of Microsoft products. And she noted that there are 500 million Office users worldwide.

Any inroads I.B.M. and its allies make against Microsoft, analysts say, will not come easily. “Three major players — I.B.M., Google and Sun — are now solidly behind a potential competing standard to Office,” said Rob Koplowitz, an analyst at Forrester Research. “But it’s a tough road. Office is very entrenched.”

Reading into 'standard' layoff announce - EDS

Announcements like these are pretty blatant... laying off high-cost US workers while retaining (and continuing to hire like mad) workers overseas . I would imagine that these workers should be eligible for special re-training Federal programs for those affected when their jobs go overseas, but I would doubt they are classified this way.

When the gov't announces it's numbers of US jobs affected by offshoring of work they will NOT include these numbers (and many thousands more from other such corporate programs), and economists and high gov't officials (Sec'y of Labor and the multitude of other high gov't officials are short-termers recruited from Corporations) will claim that offshoring is not affecting US workers. Indeed they will claim that the American worker actually benefits from globalization.

Offering early retirement is usually a harbinger to actual layoffs depending upon how many accept a package, and a voluntary 'offering' sometimes means 'take it or get nothing when the layoffs come next month'.

An interesting side-note ... EDS is an American company originally founded by Ross Perot, still doing much of it it's business with gov't agencies within the US. Note that US workers are now a minority in the firm and this next round will make them a smaller minority still, 38,000 out of 124,000 total .

EDS, which has about 136,000 employees worldwide and 50,000 in the United States ...


12 September 2007
12:52 pm GMT
Reuters News
English
(c) 2007 Reuters Limited
(Recasts, adds details)
NEW YORK, Sept 12 (Reuters) - Technology services company Electronic Data Systems Corp , on Wednesday said it offered early retirement to about 12,000 U.S. employees, nearly a quarter of the U.S. work force, and expected a charge of $70 million to $130 million in the fourth quarter.
EDS, which ranks second by revenue after International Business Machines Corp among U.S.-based technology-services companies, has been boosting profit by cutting costs (a euphemism for laying off US workers) , including 5,000 jobs last year, and generating revenue from contracts including a $3.9 billion deal from the U.S. Navy (gov't and military contracts being handled by offshore workers) last year.
"It's an initiative as part of EDS's ongoing plan to improve our cost structure (cost = people) and competitiveness," a spokesman said of the new plan.
Earlier this month, Ronald Rittenmeyer assumed the role of chief executive, succeeding Michael Jordan, who during his four-year tenure helped EDS overcome weak technology demand and market share losses to IBM.
EDS, which has about 136,000 employees worldwide and 50,000 in the United States, said the size of the final charge might be greater or lesser than its estimate, depending on the number of employees who accept the offer. (currently 37% of it's employees are US workers .. if 12,000 leave with this package they will have 31%)
The company said it announced the offer to its staff on Sept. 11 after the board authorized it on Sept. 7. It gave employees until Oct. 30 to accept the offer, according to a filing with the U.S. Securities and Exchange Commission.
EDS plans to offer eligible employees an "enhanced" benefit equal to five times the allotted annual funds made to their company retirement plan, excluding interest credits. If applicable, EDS will also offer a benefit to the employees' Benefit Restoration Plan on their behalf, plus $10,000 from the EDS Retirement Plan.
Jordan continues to serve as chairman and executive officer of the Plano, Texas, company.
Shares of EDS slipped 2.3 percent to $21.86 on the New York Stock Exchange. The stock is off about 22 percent since Rittenmeyer was named CEO in July. (Reporting by Franklin Paul and Sinead Carew in New York and Peter Henderson in Los Angeles)