Michigan following the Indian style in outsourcing

IBM recently announced a new delivery center in Michigan and Iowa. This is quiet a contrary move by the big blue, which was setting up centers in India in the past years by creating around 80,000 jobs. IBM cited the low cost labors as one of the reasons in choosing the location. After this announcement, people started to wonder if outsourcing is taking a new path and Businessweek wondered if Michigan is the new India? Though, it is a good move for the local labors at the current job market, the scenarios under which IBM chose this location should be seen beyond the low cost factor.

Below are the advantages that have triggered IBM to setup centers in these states:


1. IBM is setting up this center in collaboration with Michigan state university, which means, easy availability of skilled professionals.
2. Both the states have offered IBM a incentive of $55 million over 10 years, along with a loan of $11.5 million dollars. Also, if IBM creates 1500 jobs as it pledged, then the entire loan amount will be waived.
3. IBM center will concentrate of maintaining and modernizing the government IT infrastructure.
4. IBM will operate in one of the building present in Michigan.
5. IBM will work with the Michigan University professors to include 'Application development' in the curriculum.

If you study these advantages carefully, it is the same set of points that have lured the companies to setup operation in countries like India and it would work in US too. Every IT company in India has been offered the same kind of special tax breaks, incentives, allocation of cheap lands for office space and software economic zones. The Indian IT companies are even conducting training classes in the colleges and working closely with universities, so that the students are market ready once they graduate. Probably, these two US state governments would have studied the reason for companies like IBM setting up centers in India and the support they receive from the Indian government. Having understood this, these US states have offered the same advantage to them in their home. Also, It has offered its own government projects to kick start the IT operation. It is a successful move! If every state in US follows the similar kind of approach in attracting the companies, it could create a renewed job market in the services sector for United States.It will also serve as a better alternative for companies that is resistant to move their IT operation beyond the borders. But, one pressing question here is the availability of computer science graduates that the service industry demands.

Tags:IBM, outsourcing, Michigan state university, Indian IT