Offshoring Stories
Offshoring Stories
Date: Monday, June 12, 2006 10:47 PM
<<<<< JOB DESTRUCTION NEWSLETTER No. 1500 -- 06/12/2006 >>>>>
COMMENT FROM ROB: I have concentrated my efforts lately on the H-1B issue,
but the offshoring issue isn't going away. Lots of stuff out there on IBM.
The last three articles are about the outsourcing of our election machinery
to Hugo Chavez in Venezuela - of course Businessweek poo poos the
controversy.
Article 1:
http://www.informationweek.com/story/showArticle.jhtml?articleID=188701884
IBM To Invest $6 Billion In India To Increase Offshore IT Services
Offerings
IBM currently employs 43,000 workers in India, up from 23,000 just one year
ago.
IBM said Tuesday that it will triple its current level of investment in
India over the next three years, bringing its total spending in the country
during the period to $6 billion.
Article 2:
http://www.varbusiness.com/showArticle.jhtml?articleId=188700577
Outsourcing's Next Hot Spots
Central and Eastern Europe and North Africa are set to become the next
favored locations for outsourcing centers, especially for companies based
in Europe, a survey said. India is becoming too expensive and European
firms want a closer cultural fit,
Article 3:
http://timesofindia.indiatimes.com/articleshow/1611960.cms
Apple software logs out of India
The company that redefined the way we listen to music has decided to call
it quits in India. Apple, known for its popular iPods, is pulling out its
software development and support operations in India.
Article 4:
http://www.democratandchronicle.com/apps/pbcs.dll/article?AID=/20060604/BUSINESS/606040317/1001
Offshoring loses some of its luster
The Sentry Group went to China in late 1999 to set up a factory. The
Pittsford safe manufacturer planned to get ahead of the competition by
seizing on that nation's lower cost of labor. Yet, less than six years
later, Sentry brought a portion of that manufacturing back home, realizing
that some of its high-end safes could be made more efficiently at its
Linden Avenue plant.
Article 5:
http://www.smh.com.au/articles/2006/06/05/1149359675223.html
Wall St brokers outsource investment research to India
JPMORGAN Chase had no analysts in India four years ago. Now, the
third-largest US bank has 80, including Naresh Bilandani, a 26-year-old
London School of Economics graduate hired last year in Mumbai to help
provide clients with investment recommendations on European lenders. The
India section accounts for 14 per cent of JPMorgan's research staff
world-wide and illustrates a growing trend.
Article 6:
http://www.iht.com/articles/2006/06/04/business/ibm.php
India becomes the focal point for growth as IBM fights to stay on top
In the past few years, the growth in IBM's work force in India has been
remarkable.
Article 7:
http://www.businessweek.com/magazine/content/06_23/b3987098.htm?chan=topStories_ssi_5
IBM Wakes Up to India's Skills
The computer company is ramping up operations with cutting-edge projects
while using more low-cost, high-value local labor. The sheer speed of IBM's
(IBM ) expansion in India suggests a mad dash to hire as many low-salary
employees as possible in the shortest amount of time. The company's Indian
worforce has gone from 9,000 to 43,000 in just two and a half years. But
while low-cost labor is one of the main factors behind IBM's speedy
ramp-up, that doesn't mean its Indian employees perform low value work.
Article 8:
http://www.lowellsun.com/opinion/ci_3883780
Laid off and left out
You don't hear much from the American worker anymore. Like battered
soldiers at the end of a lost war, ordinary workers seem resigned to their
diminished status. The grim terms imposed on them include wage stagnation,
the widespread confiscation of benefits (including pensions they once
believed were guaranteed), and a permanent state of employment insecurity.
Article 9:
http://news.ft.com/cms/s/aa447f34-f973-11da-8ced-0000779e2340.html
IBM chief calls for end to colonial companies
Sam Palmisano, head of IBM, on Monday called on multinationals to evolve
into a new type of corporation if they are to avoid an anti-globalisation
backlash that leads to the election of governments hostile to the interests
of big business.
Article 10:
http://story.malaysiasun.com/p.x/ct/9/cid/3a8a80d6f705f8cc/id/0201a6c02aef908f/
Voting machine firm Venezuela tie faulted
U.S. politicians are worried the Venezuelan owners of a major electronic
voting machine firm threaten national and election security, a report says.
Article 11:
http://www.votetrustusa.org/index.php?option=com_content&task=view&id=1350&Itemid=1097
Transcript of Lou Dobb's Coverage of Voting Mahine Contoversy
KITTY PILGRIM, CNN CORRESPONDENT (voice over): The use of some 19,000
electronic voting machines in the city of Chicago and Cook County primary
on March 21st of this year is now under intense scrutiny. The U.S. company
that makes the machine, Sequoia, was bought in 2005 by Smartmatic, a
private company primarily owned by Venezuelan businessmen.
Article 12:
http://www.businessweek.com/magazine/content/06_23/b3987042.htm?chan=tc&chan=technology_technology+index+page_best+of+the+magazine
One Man, One Vote, One Conspiracy Theory
Critics of electronic balloting are raising questions about a voting
machine supplier
The company, Sequoia Voting Systems Inc., sells machines in California,
Illinois, and 18 other states. It has come under fire because its majority
shareholders are Venezuelan. In the colorful imaginations of some, the
Sequoia story is a tale that ends with Venezuela's leftist President Hugo
Chavez, a foe of the Bush Administration, in a position to manipulate
American elections.
1. +++++++++++++++++++++++++++++++++++++++++++++++++++
URL:
http://www.informationweek.com/story/showArticle.jhtml?articleID=188701884
IBM To Invest $6 Billion In India To Increase Offshore IT Services
Offerings
IBM currently employs 43,000 workers in India, up from 23,000 just one year
ago.
By Paul McDougall, InformationWeek
June 6, 2006
IBM said Tuesday that it will triple its current level of investment in
India over the next three years, bringing its total spending in the country
during the period to $6 billion. The plan aims to vastly increase the range
of IBM's offshore computer services offerings. Those services are designed
to help businesses cut costs, but critics say they also threaten U.S. tech
jobs.
In a sign of IBM's no holds barred approach to India, CEO Sam Palmisano
personally announced the plan in the IT hub of Bangalore as he spoke to a
group that included Wall Street financial analysts, 10,000 IBM employees,
and Indian president Dr. A.P.J. Abdul Kalam.
"If you are not here in India, making the right investments and finding and
developing the best employees and business partners, then you won't be able
to combine the skills and expertise here with skills and expertise from
around the world, in ways that can help our clients be successful," said
Palmisano. "I'm here today to say that IBM is not going to miss this
opportunity."
The announcement comes on the heels of a plan IBM unveiled in March, under
which the company is moving all development of business solutions based on
service-oriented architectures to Bangalore.
U.S. labor advocates charge that Western tech companies like IBM overstate
the business benefits offered by India and that their recent hiring binge
in the country is motivated mostly by the desire to slash salaries.
Programmers in India are typically paid anywhere from 40% to 80% less than
their U.S. counterparts, though salaries in the country are on the rise as
more companies compete for staff. Among others, Dell, Hewlett Packard, and
Computer Sciences Corporation are also significantly boosting hiring in
India.
IBM currently employs 43,000 workers in India, up from 23,000 just one year
ago. At the same time, the Armonk, N.Y.-based company has been quietly
trimming payrolls in the U.S., where its staff complement is now less than
150,000. IBM officials were not immediately available to comment on how
plans for India would impact the U.S. operations. On a Web site operated by
current and former IBM staffers, www.allianceIBM.org, posters routinely
share news about layoffs at IBM sites around the country.
To be sure, however, IBM's $6 billion investment in India will help fund a
number of new initiatives that should benefit its roster of blue chip
business customers. The company says it will launch "a new breed" of
service delivery centers in Bangalore that feature breakthrough
technologies designed to automate the delivery of a number of common IT
services, such as network monitoring, server, and storage management. That
could give U.S. companies the option to offshore or automate a far greater
range of IT functions by outsourcing to IBM.
Additionally, scientists and engineers at IBM's eight, global research labs
will be paired with Bangalore-based service delivery experts to find ways
to further enhance the provisioning of IT services from remote locations.
Also in Bangalore, IBM will open a Systems & Technology Group Innovation,
Development, and Executive Briefing Center. There, customers who fly in
from around the world will be able to test out IBM servers and other
hardware in various configurations running a range of system and
application software. It will also offer facilities for performance
benchmarking of equipment and proof of concept work with a special focus on
Linux-based systems.
IBM further plans to launch a research and development center for
telecommunications at its research lab in New Delhi. IBM says researchers
at the center will look for ways in which telecom providers can make better
use of data -- such as call center records -- to better serve customers.
The company also says it will increase staffing at its On Demand solutions
lab in Bangalore.
Finally, IBM unveiled plans for an academic initiative in India called The
Great Mind Challenge. IBM mentors will work with students at the country's
engineering schools on various business software projects. The top 20
projects will be put on the Internet and offered free of charge to end
users and IBM Business Partners. The program will begin June 15 and
continue through the end of this year.
2. +++++++++++++++++++++++++++++++++++++++++++++++++++
http://www.varbusiness.com/showArticle.jhtml?articleId=188700577
Outsourcing's Next Hot Spots
By Reuters , VARBusiness
6:59 AM EDT Thu. Jun. 01, 2006
Central and Eastern Europe and North Africa are set to become the next
favored locations for outsourcing centers, especially for companies based
in Europe, a survey said.
India is becoming too expensive and European firms want a closer cultural
fit, a study by the Economist Intelligence Unit (EIU), a research and
advisory firm, said on Wednesday.
Outsourcing, or offshoring, refers to activities like back-office support,
call centers and technical activities which companies move to lower-wage
countries. Companies typically save 15 percent on their costs, according to
a separate survey from outsourcing advisory firm TPI.
"Demand is increasing for more complex capabilities and a closer linguistic
and cultural fit with customers. That makes lower-cost European locations
very competitive," said senior EIU consultant Delia Meth-Cohn.
Hewlett-Packard, one of the biggest IT services companies, has opened
offices in eastern European cities Bucharest, Sofia and Bratislava where it
expects staff to increase to 4,000 by the end of 2007 from 1,500.
"In Bucharest, we plan to serve all European languages," said Jan Zadak,
who is in charge of HP's activities in Central and Eastern Europe, Middle
East & Africa.
The global offshoring market is worth between $40 billion to $50 billion a
year, and it is growing by around 30 percent annually, the EIU survey
found. It may be as much as $100 billion by 2008 and has caused concern in
some countries about jobs being moved abroad.
By 2004, when there was a public outcry in the United States about
white-collar jobs being moved to India, 700,000 such jobs had already been
created there. Another 250,000 jobs followed in 2005. However, even in the
Indian cities of Bangalore and Chennai, there is a limit to the number of
skilled people available. Indian giants like Tata Consultancy Services are
recruiting aggressively and U.S. rivals like IBM and Accenture are
competing for the same staff. As a result, labour costs are starting to
rise.
With Central European locations still at least half the cost of the
cheapest western European locations, many European companies are willing to
pay a small premium over Indian centres to get a service in their local
language.
Romania, Egypt and Jordan are some of the new locations for the offshore IT
industry, the survey said.
3. +++++++++++++++++++++++++++++++++++++++++++++++++++
http://timesofindia.indiatimes.com/articleshow/1611960.cms
Apple software logs out of India
R Raghavendra
[ Saturday, June 03, 2006 11:56:59 pmTIMES NEWS NETWORK ]
BANGALORE: The company that redefined the way we listen to music has
decided to call it quits in India. Apple, known for its popular iPods, is
pulling out its software development and support operations in India.
The company had commenced operations in April and hired about 30 people for
its subsidiary, Apple Services India Pvt Ltd.
At a meeting on May 29, Apple announced its decision to lay off all its
employees. Apple officials told them that "the company is revaluating its
operations and has thought of pulling back its Indian operations".
Apple is giving these employees a severance package of two months salary.
It will settle all claims on June 9. When contacted, Steve Dowling, an
Apple spokesperson, said, "We have re-evaluated our plans and have decided
to put our planned support centre growth in other countries."
Apple continues to operate its sales and marketing arm in Bangalore which
employs 25 people. For most employees -- a few have returned to their
former employers -- it was a bolt from the blue.
"It started off with building dreams. We were not given any warning. They
just told us the operations would now head back to the US," said a sacked
employee.
Considering the low-cost, high-quality talent pool that Bangalore offers,
it is unclear why Apple decided to shut shop just over a month after it
commenced operations.
Apple had set itself a hiring target of 600 by the year-end. After a gala
induction ceremony on April 17, the operations team went to Transworks for
training. Some of the managers were about to leave for the US for further
training when they were asked to stay put.
"On May 15, Apple officials addressed us and were highly appreciative of
the workforce and the task it would execute in India. I wonder why they
never said anything even then," said another fired employee.
4. +++++++++++++++++++++++++++++++++++++++++++++++++++
http://www.democratandchronicle.com/apps/pbcs.dll/article?AID=/20060604/BUSINESS/606040317/1001
June 4, 2006
Offshoring loses some of its luster
Some area companies find Asian markets not good fit
David Tyler
Staff writer
The Sentry Group went to China in late 1999 to set up a factory. The
Pittsford safe manufacturer planned to get ahead of the competition by
seizing on that nation's lower cost of labor.
Yet, less than six years later, Sentry brought a portion of that
manufacturing back home, realizing that some of its high-end safes could be
made more efficiently at its Linden Avenue plant.
Sentry's story is one that's beginning to be repeated a lot in business,
both in the Rochester area and nationwide.
Offshoring, the movement of labor from high-cost markets in the United
States to low-cost markets overseas, has been billed as a panacea for
business profits. But many companies, including some locally, are finding
that the practice isn't all it was cracked up to be and have brought some
of their work back stateside.
Businesses have found they can run into many troubles -- high shipping
costs, longer lead times, delays in customs at the border, production
defects. Unreliable, or in some cases unscrupulous, foreign business
partners can be another negative factor.
In Sentry's case, the company had several reasons for bringing the
production back to Pittsford, said Torsten Rhode, director of advanced
manufacturing. Rhode said Sentry was looking to adhere to lean
manufacturing principles and discovered the distance wasn't helping that
effort.
"When your supply chain stretches over 12,000 miles, it's not very lean,"
he said.
Shipping costs for larger gun safes, which retail for more than $500, began
to add up. Increased security at ports after the Sept. 11, 2001, terrorist
attacks and fears of a port strike on the West Coast also caused Sentry
officials to worry about a disruption of their product.
So the company decided to bring the manufacturing line for its large gun
safes back to headquarters. Last August, the first safes rolled off a new
$2 million assembly line. The move added 30 jobs.
Having the manufacturing line back in the region has allowed Sentry to fix
problems more quickly and make adjustments when needed, Rhode said. It has
also allowed quick development of new products, including the first
waterproof gun safe, he said.
The company also found savings in travel costs and increased automation,
which the Chinese operation didn't have. Lead times are shorter, too.
"You don't have to worry that someone isn't in the office because they're
12 hours ahead of us," Rhode said.
Sentry still runs its Shanghai plant, using it for lower-cost, more
labor-intensive safes, Rhode said.
Other companies are following the same trend. Last month, at a California
conference put on by Red Herring magazine, several venture capitalists
advised small companies against offshoring. One speaker said 50 percent of
offshoring projects fail for small firms.
Computer executive Steve Lewis told the conference to focus on saving time,
rather than just money, the magazine reported. "We're in the speed
business, and India will slow you down to the point of near-death," he
said.
Linda Cohen, chief of outsourcing research for Connecticut-based Gartner,
also cautioned against offshoring. Since last fall, she's been pitching
what Gartner calls "disciplined multisourcing" rather than off-shoring for
off-shoring's sake.
Harry Groenevelt, an associate professor of operations management at the
University of Rochester's William E. Simon Graduate School of Business
Administration, said he's not surprised to see companies bringing some work
back home.
"The advantages are easy to see," he said. "The costs are not that visible
and some people tend to overestimate the savings."
Groenevelt said he tells his students to be cautious when it comes to
offshoring. "There are some things where it makes a lot of sense. But you
can lose flexibility and you can lose the ability to react quickly, and
while those things are hard to quantify, they do have a cost."
With time and distance differences, production problems often get
discovered late in the process, Groenevelt said, and that can leave a
company with some unusable inventory.
In some cases, the costs can go even higher.
Newtex Industries of Victor, Ontario County, learned a painful lesson, said
Chairman Bal Dixit. The company, which makes fireproof fabrics and safety
suits, partnered with a company in Singapore and China. Dixit said he and
the manager for the Asian operations parted ways, and after the departure,
officials discovered the manager had been embezzling company funds.
Newtex has spent $100,000 on forensic accounting to reconstruct what
happened and rebuild the operation, he said.
"Our operation got decimated there. We lost a lot of people." The cleanup
is still going on, Dixit said.
"For a small business it is very difficult to keep track of everything."
While the company has returned some of its overseas work to Victor, it left
other operations in Asia because of the cost savings, Dixit said. And now,
Chinese officials may force Newtex to relocate in order to build a train
station on its site, he said.
Dixit said he's learned a painful lesson.
"You really need to have your own people there. The culture is different,
the language is different. They could be doing something right under your
nose and you might not know it," he said. "You have to protect the assets."
Many local businesses say companies have to be smart about offshoring and
choose a middle ground. Michael Nuccitelli, CEO of Perinton toolmaker
Parlec Inc. and co-owner of Century Mold in Gates, said his businesses have
found ways to work effectively both in the United States and China.
"It's not a yes or a no," he said.
The Chinese operations produce simple parts that are easily shipped. U.S.
operations produce more complicated engineered parts, he said. "Generally
we're not willing to bring heavily engineered or application-based
products" overseas for manufacturing.
Parlec and Century didn't want to be tied too heavily to one location,
Nuccitelli said. For example, Century Mold, which makes molding for auto
parts, uses both a plant in Tennessee and its Chinese plant for applying
foam and molding to a part for a heating and air-conditioning system,
Nuccitelli said.
"Low-cost labor moves. Ten years from now, there will be another country
that's low-cost for labor and everyone will want to go there."
Nuccitelli said it was important for his businesses to thoroughly research
Chinese opportunities before committing to move. "If you're not willing to
learn everything about it, it's tough."
Groenevelt, of the Simon School, agreed that thoroughly vetting
opportunities is a must.
"There's a lot you have to learn and there's likely going to be some
surprises, and they are not always favorable to the bottom line."
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http://www.smh.com.au/articles/2006/06/05/1149359675223.html
Wall St brokers outsource investment research to India
Email Print Normal font Large font Yalman Onaran
June 6, 2006
JPMORGAN Chase had no analysts in India four years ago. Now, the
third-largest US bank has 80, including Naresh Bilandani, a 26-year-old
London School of Economics graduate hired last year in Mumbai to help
provide clients with investment recommendations on European lenders.
The India section accounts for 14 per cent of JPMorgan's research staff
world-wide and illustrates a growing trend. Niket Patankar, who sells
research services to investment banks in less expensive markets, estimates
that India's analyst ranks have swelled to 5700 now from 300 in 2002.
Merrill Lynch, the second-largest US securities firm by market value, and
Morgan Stanley, the third biggest, employ more than 50 of them.
Securities firms are leaning on India's expanding pool of financial talent
for number-crunching so they can afford to keep franchise analysts in New
York and London. Wall Street's 2003 settlement with US regulators cut off
research departments from the revenue they got for helping investment
bankers bring in fees. Now institutional customers such as Fidelity
Investments are refusing to pay the inflated trading commissions that
subsidised analyst reports for decades.
"We got outsourced," said Tom Larsen, who lost his job in London covering
UK companies when Credit Suisse moved five of the seven analyst jobs in his
group to India. "Wall Street is aware that the old model, financed by
investment banking, doesn't work any more. So it's trying different
models, including outsourcing."
Mr Larsen, 45, is now a senior policy analyst at the CFA Institute, the US
organisation that licenses chartered financial analysts after candidates
have passed a three-level set of once-a-year, half-day exams on everything
from research ethics to discounted cash flow modelling.
The number of people taking CFA tests in India climbed fivefold since 2002
to 3178 this year, according to the CFA Institute. US candidates fell by
about 25 per cent to 30,384.
Mr Patankar, co-founder of New York's Adventity, predicts India will have
more than 20,000 analysts in 2011. That would put it ahead of the 15,229
securities analysts working at brokerages and investment banks in the US,
according to Thomson Financial. The UK has 1228 analysts.
"Research is probably the easiest investment-banking service that can be
duplicated in India, where people are just as smart and educated as here,"
said Nejat Seyhun, a professor of finance at the University of Michigan in
Ann Arbor. "Technology has reduced the need for physical presence."
The trend mirrors past shifts in industries from computers to cars, where
companies from Dell to Ford Motor moved production to low-cost centres such
as Malaysia and Vietnam.
JPMorgan is keeping more experienced analysts, such as Michael Weinstein,
ranked No.1 in Institutional Investor's annual poll, for his coverage of
medical supply and device companies. Mr Weinstein, based in New York, works
less than an hour's drive from the biggest company in that industry,
Johnson & Johnson in New Brunswick, New Jersey.
Mr Bilandini's Mumbai office is 5178 kilometres from the Athens
headquarters of the National Bank of Greece, one of the companies that he
tracks for JPMorgan.
Investment banks are "salami-slicing their research activities and
separating what needs to be at high-cost centres like New York from what
doesn't," said Chris Gentle, director of financial services research at
Deloitte Services in London. "Pressure to move offshore will grow as
investment banks look for ways to cut costs while their budgets are
squeezed."
Wall Street's research spending fell about 35 per cent from 2001 to 2005,
estimates Brad Hintz, an analyst in New York for Sanford C. Bernstein who
tracks the securities industry. Mr Hintz's own firm relies mainly on
bundling, or billing clients for research and trade execution in a single
commission, for the revenue it needs to compensate analysts.
Total commissions paid for trading US stocks dropped to $US11.3 billion in
2005 from $US13.4 billion in 2002, according to a survey of 239 fund
managers by industry consultants at Greenwich Associates in Connecticut.
The proportion allocated to research remained constant at 40 per cent, the
survey found.
That decline made it impossible for the securities industry to maintain the
same research staff in high-cost centres.
The number of analysts working for the 10 biggest firms declined 21 per
cent to 2641 as of November from 3364 in 2001, according to Thomson
figures.
India is helping to reverse the trend. Analysts in cities like Mumbai make
as little as $US20,000 ($26,570) a year, according to Absolute Return, a
hedge fund newsletter. That compares with an average of $US181,000 in the
US in 2005, a survey by the CFA Institute found.
Even though they earn less, analysts in India enjoy a higher standard of
living. Per capita income in the country is about $US3000, based on
purchasing power, compared with $US40,000 in the US.
"The multinationals have the best-paying jobs and a great working
environment," said Mr Bilandani, who gets paid about 70 per cent more than
what he would get working for one of the local banks.
JPMorgan's global head of research, Nick O'Donohoe, said moving some of its
research to India helped the firm increase coverage 50 per cent in four
years to 1230 companies. Merrill Lynch now publishes reports on 2840
stocks, up 24 per cent from 2004.
Some banks are less sanguine about the benefits. Citigroup, the biggest US
financial services company, is increasing its research staff in major
centres such as New York and London, and opening new offices in Russia and
Thailand.
"Cutting the number of analysts is a move away from quality," said Matthew
Carpenter, Citigroup's head of research for the Americas. "There's a great
value for research if you can differentiate yours from others."
Citigroup was hardest hit when New York Attorney-General Eliot Spitzer
cracked down on conflicts of interest in equity research. The company paid
$US400 million to resolve the allegations, the biggest share of the $US1.4
billion settlement with regulators in May 2003.
Then-chairman and chief executive officer Sanford Weill was barred from
talking to research staff without a compliance official at his side and
former telecommunications analyst Jack Grubman, who earned $US20 million a
year during the internet bubble, was banned from the industry for life.
Citigroup slashed its analyst ranks to 300 in 2003 from almost 450 in 2000.
Mr Carpenter said that number had increased to 350 since then.
6. +++++++++++++++++++++++++++++++++++++++++++++++++++
http://www.iht.com/articles/2006/06/04/business/ibm.php
India becomes the focal point for growth as IBM fights to stay on top
By Saritha Rai The New York Times
MONDAY, JUNE 5, 2006
BANGALORE, India The world's biggest computer services company could not
have chosen a more appropriate setting to lay out its strategy for staying
on top.
On Tuesday, on the expansive grounds of the Bangalore Palace, a
colonial-era mansion once inhabited by a maharajah, International Business
Machine's chairman and chief executive, Samuel Palmisano, will address
10,000 Indian employees. He will share center stage with A.P.J. Abdul
Kalam, India's president, and Sunil Mittal, chairman of the country's
largest cellular services provider, Bharti Enterprises.
Another 6,500 employees will look in on the "town hall" meeting by
satellite from other Indian cities.
On the same day, Palmisano and other top executives will meet in Bangalore
with investment analysts and local customers to showcase IBM's global
integration capabilities in a "global briefing" that is usually held in New
York.
During the week, the company will lead the 50 analysts on a tour of its
Indian operations.
The meetings are more than an exercise in public and investor relations.
They are an acknowledgment of India's crucial role in IBM's strategy,
providing its fastest growing market and a crucial base for delivering
services to much of the world.
"A significant part of any large project that we do worldwide is today
being delivered out of here," said Shanker Annaswamy, IBM India's managing
director and country head, who presides over what is now the company's
second largest worldwide operation.
In the past few years, the growth in IBM's work force in India has been
remarkable. The number of IBM employees in India has grown to 43,000 (out
of 329,000 worldwide, 191,000 in services) from 9,000 in early 2004, making
IBM the largest multinational employer in the country.
Some of the growth has been through acquisition. In a $160 million deal in
2004, IBM purchased Daksh eServices of New Delhi, one of India's largest
back-office outsourcing firms, with 6,000 workers. Since then, that
operation alone has grown to 20,000 employees.
"Now that companies such as Infosys Technologies and Cognizant have clearly
demonstrated that the services marketplace is not impregnable, the new
battle is for talent," said Lakshmi Narayanan, president and chief
executive of Cognizant Technology Solutions of Teaneck, New Jersey.
Cognizant is one of IBM's "hybrid" competitors, meaning that it is
incorporated in the United States but has the bulk of its 28,000 employees
in India.
IBM is certainly hiring in the thousands, but it is growing not just in
size but also in revenues. The company's India business grew 61 percent in
the first quarter of 2006, 55 percent in 2005 and 45 percent in 2004.
That growth has not come just from taking advantage of the country's pool
of low-cost talent. In recent months, the technology hub of Bangalore has
become the center of IBM's efforts to combine high-value, cutting-edge
services with its low-cost model.
For instance, IBM's India Research Lab, with units in Bangalore and New
Delhi, has created key products like a container tracking system for global
shipping companies, and a warranty management system for carmakers in the
United States. Out of the second project, IBM researchers have fashioned a
predictable modeling system that helps track the failure of components
inside a vehicle, a potentially critical tool.
In March, the company opened a Global Business Solutions Center in the
city, announcing that it would represent the "future of consulting
services." The new center, in which IBM expects to invest more than $200
million a year, provides IBM clients with access to the best ideas and
expertise of its 60,000 consultants worldwide in complex areas like supply
chain optimization and banking regulation compliance.
But competitors, both Western rivals and Indian outsourcing firms, are
trying to gain on IBM. Accenture, a rival consulting firm, is ramping up
equally rapidly in India, while another outsourcing competitor, Electronic
Data Systems, recently made a conditional offer for a controlling stake in
a midsize outsourcing firm based in Bangalore, MphasiS.
The race for India's skilled, inexpensive talent may not stop at IBM. "Many
companies in the technology development and support niche covet and value
these workers highly," said Kevin Moss, a New York-based special counsel at
Kramer Levin Naftalis & Frankel's outsourcing and technology transactions
group. Moss specializes in structuring, negotiating and drafting
outsourcing deals.
On the pricing front, rivals like Tata Consultancy Services, based in
Mumbai, and Infosys Technologies, based in Bangalore, have pioneered and
perfected the low-cost model. Infosys Technologies, with 52,700 employees,
has $2.15 billion in annual revenues, a figure growing 30 percent annually.
But the depth, breadth and geographic spread of IBM's global operations,
which generated $91 billion in sales last year and $47 billion from
services, keep it ahead of its competitors for now.
For example, for one of the largest American oil firms, IBM developed and
manages the backbone of a system that keeps tab on consumption, manages its
financial and administrative process, manages the technical help desk and
maintains the data network and servers. And the company is researching
tools to track assets and reduce costs.
"All this is done for one customer seamlessly from three of our centers in
Bangalore, Chicago and outside of London," said Amitabh Ray, director of
global delivery, IBM Global Services. "These kinds of capabilities and
global scale are unmatched," Ray said.
But smaller rivals are playing catch- up here too, by acquiring
"consulting" capabilities or by talking to customers about their needs and
then developing custom-built software solutions to fulfill those needs.
Infosys Technologies, for instance, has a consulting unit based in Fremont,
California, near Silicon Valley, where it now has 200 consultants, with an
additional 1,800 consultants in India.
Meanwhile, the transformation sweeping IBM is not without its challenges.
Annaswamy, the company's India chief, admitted that the "hyper growth mode"
was testing the company because thousands of recruits have to be integrated
into the company quickly. Salaries are rising and employee costs are also
moving up, he said.
Even so, the Indian operation is becoming more and more strategic for the
company. "Both in terms of size and scale, India has become the focal
point," Ray said.
7. +++++++++++++++++++++++++++++++++++++++++++++++++++
http://www.businessweek.com/magazine/content/06_23/b3987098.htm?chan=topStories_ssi_5
JUNE 5, 2006
INFORMATION TECHNOLOGY
By Steve Hamm
Online Extra: IBM Wakes Up to India's Skills
The computer company is ramping up operations with cutting-edge projects
while using more low-cost, high-value local labor
The sheer speed of IBM's (IBM ) expansion in India suggests a mad dash to
hire as many low-salary employees as possible in the shortest amount of
time. The company's Indian worforce has gone from 9,000 to 43,000 in just
two and a half years. But while low-cost labor is one of the main factors
behind IBM's speedy ramp-up, that doesn't mean its Indian employees perform
low value work. "We're putting the highest level of skills in India,"says
Larry Longseth, vice-president of server systems operations at the
company's strategic outsourcing unit.
In fact, Bangalore -- India's Silicon Valley--has become the epicenter for
some of IBM's most important projects. A global delivery center completed
there last year is IBM's most advanced outsourcing facility in the world --
employing 2,000 people, equipped with the latest data center management
systems, and using the most advanced business processes. Bangalore is also
the site of a 14-scientist lab set up by IBM Research to pioneer
technologies for automating tech services.
The staff is expected to double by the end of the year. And, most recently,
the company established a software development center that creates
industry-specific software modules to be used by IBM consultants to build
sophisticated information systems for their clients. "The focus on
Bangalore is tremendous at all levels. It's the center of the world right
now for IBM," says Guruduth Banavar, head of the company's Bangalore
research lab.
WATCH YOUR BACK. In addition to those cutting-edge projects, IBM India
also has nearly 20,000 business process outsourcing employees at its Daksh
subsidiary, 17,000 people developing software applications for specific
clients, 2,000 programmers who work for its software group, and a basic
research lab in Delhi. Plus, it has a sales force and consultants focusing
on the domestic Indian market for technology hardware and services, where
IBM sales grew by 59% last year to about $1.4 billion -- making it the
company's fastest growing market.
Having a large footprint in India also helps IBM keep close tabs on the
local tech industry. Indian outfits including TCS, Infosys (INFY ), and
Wipro (WIT ) pose a serious challenge to Western tech-services companies
due to their low costs and high quality work. "We don't consider the Big
Six outsourcers to be our threat," says Longseth.
"Our competition is Wipro and Infosys. We see that if we don't move
quickly, the Indians will be doing to strategic outsourcing what they have
done to applications development."
GOOD SCIENCE. While Indians have had a huge impact on software programming
services, they are just starting to make a mark on the strategic
outsourcing business -- which includes managing data centers. IBM hopes
that by rapidly automating data center tasks and establishing superior
service processes, it will be able to establish an insurmountable lead in
this area. "We're trying to lead the charge down that path. We think we're
the dog to chase," says Michael Daniels, senior vice-president for IBM
Global Technology Services, a $31 billion business in 2005.
IBM is relying on its research scientists to give it an edge. The company
established its Global Delivery Research and Development group late last
year to apply math and science to services. So far, the group -- made up of
65 researchers and 150 service delivery people -- has come up with 15
projects and has begun piloting them in India.
"Bangalore is our living lab where we take new technologies and processes
and deploy them. Once we test them there we'll deploy them around the
globe," says Mahmoud Naghshineh, director of service delivery for IBM
Research.
PROACTIVE SOFTWARE. Another target for the researchers: Customer service
call centers. IBM bought Indian call center pioneer Daksh in 2004 for about
$150 million, and has left the original management team in charge. Pavan
Vaish, IBM Daksh's chief operating officer, says he has been forging
partnerships with the research organization to bring new technologies to
bear on call center operations.
"We're like kids in a candy shop," he says. One technology that is already
in use is a software application that combs through the information
collected from customers by call center operators, spots emerging problems,
and alerts clients in a matter of days so they can quickly address them.
IBM may never be able to match its Indian rivals on price, but analysts
believe its vast resources of technology and expertise -- including people
in India -- will help bridge the gap. "These other things can give them a
competitive edge," says Mark Toon, chief executive of outsourcing advisory
firm EquaTerra.
8. +++++++++++++++++++++++++++++++++++++++++++++++++++
http://www.lowellsun.com/opinion/ci_3883780
Laid off and left out
The Lowell Sun
Lowell Sun
By BOB HERBERT
You don't hear much from the American worker anymore. Like battered
soldiers at the end of a lost war, ordinary workers seem resigned to their
diminished status.
The grim terms imposed on them include wage stagnation, the widespread
confiscation of benefits (including pensions they once believed were
guaranteed), and a permanent state of employment insecurity.
For an unnecessarily large number of Americans, the workplace has become a
hub of anxiety and fear, an essential but capricious environment in which
you might be shown the door at any moment.
In his new book, The Disposable American: Layoffs and Their Consequences,
Louis Uchitelle tells us that since 1984, when the U.S. Bureau of Labor
Statistics started monitoring "worker displacement," at least 30 million
full-time workers have been "permanently separated from their jobs and
their paychecks against their wishes."
Uchitelle writes on economic issues for The New York Times. In his book, he
traces the evolution of that increasingly endangered species, the secure
job, and the effect that the current culture of corporate layoffs is having
on ordinary men and women.
He said he was surprised, as he did the reporting for the book, by the
extensive emotional fallout that accompanies layoffs. "There's a lot of
mental health damage," he said. "The act of being laid off is such a blow
to the self-esteem. Layoffs are a national phenomenon, a societal problem
-- but the laid-off workers blame themselves."
In addition to being financially strapped, laid-off workers and their
families are often emotionally strapped as well. Common problems include
depression, domestic strife and divorce.
Uchitelle's thesis is that corporate layoffs have been carried much too
far, that they have gone beyond a legitimate and necessary response to a
changing economy.
"What started as a necessary response to the intrusion of foreign
manufacturers into the American marketplace got out of hand," he writes.
"By the late 1990s, getting rid of workers had become normal practice,
ingrained behavior, just as job security had been 25 years earlier."
In many cases, a thousand workers were fired when 500 might have been
sufficient, or 10,000 were let go when 5,000 would have been enough. We pay
a price for these excesses. The losses that accrue to companies and
communities when many years of improving skills and valuable experience are
casually and unnecessarily tossed on a scrap heap are incalculable.
"The majority of the people who are laid off," said Uchitelle, "end up in
jobs that pay significantly less than they earned before, or they drop out
altogether."
At the heart of the layoff phenomenon is the myth, endlessly repeated by
corporate leaders and politicians of both parties, that workers who are
thrown out of their jobs can save themselves, can latch onto spiffy new
jobs by becoming better-educated and acquiring new skills.
"Education and training create the jobs, according to this way of
thinking," writes Uchitelle. "Or, put another way, a job materializes for
every trained or educated worker, a job commensurate with his or her
skills, for which he or she is appropriately paid."
That is just not so, and the corporate and political elite need to stop
feeding that bogus line to the public.
There is no doubt that the better-educated and better-trained get better
jobs. But the reality is that there are not enough good jobs currently
available to meet the demand of college-educated and well-trained workers
in the United States, which is why so many are working in jobs for which
they are overqualified.
A chapter in The Disposable American details the plight of exquisitely
trained airline mechanics who found themselves laid off from jobs that had
paid up to $31 an hour. Uchitelle writes: "Not enough jobs exist at $31 an
hour -- or at $16 an hour, for that matter -- to meet the demand for them.
Jobs just don't materialize at cost-conscious companies to absorb all the
qualified people who want them."
The most provocative question raised by Uchitelle is whether the private
sector is capable of generating enough good jobs at good pay to meet the
demand of everyone who is qualified and wants to work.
If it cannot (and so far it has not), then what? If education and training
are not the building blocks to solid employment, what is? These are public
policy questions of the highest importance, and so far they are being
ignored.
Bob Herbert is a syndicated columnist who writes for the New York Times.
9. +++++++++++++++++++++++++++++++++++++++++++++++++++
http://news.ft.com/cms/s/aa447f34-f973-11da-8ced-0000779e2340.html
IBM chief calls for end to colonial companies
>By Francesco Guerrera in New York and Richard Waters in San Francisco
>Published: June 11 2006 22:02 | Last updated: June 11 2006 22:02
Sam Palmisano, head of IBM, on Monday called on multinationals to evolve
into a new type of corporation if they are to avoid an anti-globalisation
backlash that leads to the election of governments hostile to the interests
of big business.
In a rare public intervention, Big Blues chairman and chief executive
writes in todays Financial Times that traditional multinational
companies need to abandon their almost colonial approach to operations
outside their home country. He cites as examples of this old-style method
the way GM, Ford and his own company built factories in Europe and Asia but
kept all the research and development in the US.
Instead, he argues they need to move towards full global integration of
their operations so as to stop the current unease about the forces of
globalisation turning into an all-out assault on big business. The danger
for multi-nationals that fail to change their thinking is that countries
will elect political leaders who impose draconian labour regulations or try
to constrain free trade.
"The alternative to global integration is not appealing: left unaddressed,
the issues surrounding globalisation will only grow...People may ultimately
choose to elect governments that impose strict regulations on trade or
labour, perhaps of a highly protectionist sort," he writes.
His views could upset many US anti-globalisation campaigners who see
offshoring as a threat to US jobs. But to them, Mr Palmisano replies:
"These decisions are not simply a matter of offloading non-core activities,
nor are they mere labour arbitrage -- that is, shifting work to low-wage
regions."
The IBM chiefs decision to go on the offensive comes less than a week
after he announced plans to invest $6bn in India, highlighting the latest
step in Big Blues efforts to shed its multinational structure.
IBMs bid to become more global marks an attempt to revive its flagging
growth rate while unlocking a new source of productivity growth. Last year,
it overhauled its European operations to reduce its strict focus on
country-level operations, and executives said last week that the move to a
global management approach could produce productivity improvements of 3 per
cent a year.
He says traditional multi-national companies were designed to deal with the
"protection and nationalism" that held sway in the 20th century. The modern
company, Mr Palmisano writes, is a "globally integrated enterprise", which
spreads its strategies, production capacity and management around the world
in order to be close to markets and customers.
"The globally integrated enterprise is an inherently better and more
profitable way to organise business activities -- and it can deliver
enormous economic benefits to both developed and developing nations," he
writes.
10. +++++++++++++++++++++++++++++++++++++++++++++++++++
http://story.malaysiasun.com/p.x/ct/9/cid/3a8a80d6f705f8cc/id/0201a6c02aef908f/
Voting machine firm Venezuela tie faulted
Big News Network
Saturday 3rd June, 2006 (UPI)
U.S. politicians are worried the Venezuelan owners of a major electronic
voting machine firm threaten national and election security, a report says.
Rep. Carolyn B. Maloney, D-N.Y., has asked the Treasury Department to look
into Sequoia Voting Systems and its parent company, Smartmatic Corp.
Smartmatic is owned by a group of Venezuelan investors but company
president, Jack Blaine, said the firm no longer has ties to the Venezuelan
government.
Maloney's letter to Treasury Secretary John Snow said foreign connections
in U.S. voting could corrupt elections, the Los Angeles Times reports.
The controversy comes after other nationalist fights that stopped a Chinese
firm from buying a U.S. oil company and a Dubai firm from operating U.S.
ports.
Sequoia's Venezuelan connection has raised the concern of Chicago Alderman
Edward Burke who said there were minor problems with the March primary
elections.
11. +++++++++++++++++++++++++++++++++++++++++++++++++++
http://www.votetrustusa.org/index.php?option=com_content&task=view&id=1350&Itemid=1097
Transcript of Lou Dobb's Coverage of Voting Mahine Contoversy
By CNN
June 05, 2006
From June 2, 2006
KITTY PILGRIM, CNN CORRESPONDENT (voice over): The use of some 19,000
electronic voting machines in the city of Chicago and Cook County primary
on March 21st of this year is now under intense scrutiny. The U.S. company
that makes the machine, Sequoia, was bought in 2005 by Smartmatic, a
private company primarily owned by Venezuelan businessmen.
When Chicago had problems with the machines, a dozen Venezuelan employees
were there to help with the election. Chicago officials are outraged.
EDWARD BURKE, CHICAGO CITY COUNCIL: Well, I think that American elections
ought to be run by American companies and ought to be run by American
citizens, not Venezuelan nationals.
PILGRIM: Smartmatic is technically based in Boca Raton, Florida, but the
president of the company, Jack Blaine, testified to the Chicago City
Council fewer than a dozen Smartmatic employee work in Florida. The
majority of the workers are based in Venezuela.
Watchdog groups question why U.S. voting machines would be under the
control of citizens of another country, especially a country whose own
election process is highly suspect.
JOAN KRAWITZ, VOTE TRUST USA: We believe this is a national security issue.
There is no way that companies belonging to non-U.S. corporations should
have access to our elections.
PILGRIM: The Treasury Department is supposed to monitor sales of U.S.
companies to overseas investors where there is a question of national
security, such as in the Dubai ports deal, the so-called CFIUS review
process.
Some in Congress are demanding an investigation.
REP. CAROLYN MALONEY (D), NEW YORK: In the case of Smartmatic, there are a
number of unanswered questions. That's why I wrote to the secretary of the
Treasury and asked them to review the ownership. It's offshore, it's murky.
No one seems to know who even owns it. Certainly our government should
know.
PILGRIM: A potential risk to the democratic process.
(END VIDEOTAPE)
PILGRIM: Now, we called the Treasury Department to ask if the sale of
Sequoia in 2005 had been reviewed or not. The Treasury told us they were
aware of the sale but can't confirm if it's been reviewed or not. And some
in Congress and voter watchdog groups also are demanding a better answer
than that -- Lou.
DOBBS: Well, this Treasury Department is filled with incompetence. They
have stopped in over 1,500 reviews only one sale to foreign owners of
American assets. But a voting machine company critical to this country's
election count, and they can't tell you whether or not the Committee on
Foreign Investment in the United States reviewed it or not?
PILGRIM: They have no answer for us. And even...
DOBBS: These are the most arrogant, incompetent, bureaucratic idiots. I
mean, the Treasury Department is trying to move ahead of a number of other
departments in that -- in that category.
PILGRIM: It's incomprehensible that this would be in any way a question.
DOBBS: Have we put a call in to -- I know John Snow's on a short tether and
short tenure, but perhaps somebody who works for him would have some basic
sense that he owes the American people an answer?
PILGRIM: Lou, we have been trying to get answers, and we have also been
calling the Chicago officials. They said they thought it was a
Florida-based company. So there are a lot of people...
DOBBS: Unbelievable.
PILGRIM: ... in murky, murky territory right here. And I think it really
does deserve some examination.
DOBBS: Great -- it certainly does. We're going continue to do so.
I think we need to tip our hat to the congresswoman. She did a marvelous
job in looking into this. And hats off to her. At least somebody is trying
to make some sense.
This administration -- call the White House. Let's find out the answer so
this audience knows exactly what's going on by Monday evening. And this is
ridiculous! It's -- this one...
PILGRIM: We are looking into it actively -- Lou.
DOBBS: Thank you, Kitty. An outstanding report. It just burns me up.
From June 5, 2006
DOBBS: Tonight, new evidence that the federal government has ignored a
threat to the integrity of our elections. A group of Venezuelan businessmen
have bought an American company that supplies electronic voting machines
and counts the votes. But your government didn't even review the sale. Who
should worry about democracy? Kitty Pilgrim reports.
(BEGIN VIDEOTAPE)
KITTY PILGRIM, CNN CORRESPONDENT (voice-over): Smartmatic, based in Boca
Raton, provides voting machine in local elections in the United States,
like this election in Chicago in March.
But Smartmatic has only five-to-seven people working in Boca Raton,
Florida. Smartmatic is a labyrinth of international holding companies owned
by Venezuelan businessmen. Smartmatic Group NV of Curacao, Netherlands,
Antilles -- owns Smartmatic International BV of Amsterdam, Netherlands,
owns Smartmatic Corporation of Florida, which bought Sequoia Voting Systems
of California, USA, in 2005.
When Smartmatic bought the U.S. voting machine company Sequoia in 2005, the
U.S. government did not review the sale. In discussions with this program
today, Smartmatic lawyers admitted, "We were contacted by Treasury about a
week ago, and we have provided documents over the last few days."
The big worry for U.S. elections is Smartmatic and other voting machine
companies are private companies. They have proprietary software that they
can call a trade secret. Electronic voting experts with extensive
experience say it's nearly impossible to verify if a proprietary system is
tamper-proof.
DOUGLAS JONES, ASSOC. PROF., UNIV. OF IOWA: All of the voting system
vendors in the United States are private companies. The problem is the
closed-door proprietary nature of the process. The closed system we have
right now makes it extremely hard to find out what's going on, and that
means that should a thief get in a position of power, we would never know.
PILGRIM: Some voter watchdog groups and others in congress are calling for
a full review and say the ownership of all electronic voting companies
should be reviewed to determine if it poses a risk to U.S. elections.
The U.S. Treasury Department today would not confirm or deny if a so-called
CIFIUS review is under way on Smartmatic.
(END VIDEOTAPE)
The U.S. Treasury Department tells us they can review documents for months,
even weeks before a 30-day formal review can begin, and then the agency can
decide to extend that for another 45 days. What they say they can't tell us
is if they are looking into Smartmatic, but that's something the company
itself admitted to us today, Lou.
DOBBS: That they were not reviewed by the Committee on Foreign Investment
in the United States?
PILGRIM: When they were bought --
DOBBS: That no one at the Treasury Department, no one in this federal
government took one look at this transaction.
PILGRIM: They absolutely did not.
DOBBS: And meanwhile, the election people in the federal government have no
concept of who they are doing business with, how in the world it will work,
whether or not they can assure us that this election in mid-terms in nearly
every state is accurate and verifiable.
PILGRIM: In fact, the Chicago officials admitted to us that they thought
they were dealing with a Florida, U.S. company.
DOBBS: Well, we know what we're dealing with, and it is a dysfunctional
government that is trying to render our elections precisely the same.
Kitty, thank you very much, as we will continue reporting on what is an
outright threat to our democracy, to the integrity of our voting system,
and to our elections process. Thank you, Kitty.
12. +++++++++++++++++++++++++++++++++++++++++++++++++++
http://www.businessweek.com/magazine/content/06_23/b3987042.htm?chan=tc&chan=technology_technology+index+page_best+of+the+magazine
JUNE 5, 2006
NEWS: ANALYSIS & COMMENTARY
One Man, One Vote, One Conspiracy Theory
Critics of electronic balloting are raising questions about a voting
machine supplier
After the controversial 2000 Presidential election, the U.S. embarked on a
campaign to replace paper ballots and their infamous hanging chads with
electronic voting. But the new systems, many based on touch screens similar
to bank ATMs, have become the bane of computer experts and some political
activists on the Left.
Critics say the systems are riddled with security leaks that could allow
corrupt companies or polling officials to steal elections. Now the
complicated ownership of one of the nation's top three voting-equipment
companies has attracted a new cadre of doubters.
The company, Sequoia Voting Systems Inc., sells machines in California,
Illinois, and 18 other states. It has come under fire because its majority
shareholders are Venezuelan. In the colorful imaginations of some, the
Sequoia story is a tale that ends with Venezuela's leftist President Hugo
Chavez, a foe of the Bush Administration, in a position to manipulate
American elections.
In Washington, Representative Carolyn B. Maloney (D-N.Y.) has asked the
Treasury Dept. to explain Sequoia's sale to the Venezuelans last year. "It
doesn't seem like the deal...was vetted by our government, and I want to
know why," she said in a May 5 letter.
Following a contentious Apr. 7 hearing on Sequoia's role in a recent
Chicago primary, city Alderman Edward M. Burke, a relatively conservative
Democrat, said: "We've stumbled on what we think could be an international
conspiracy to subvert the electoral process in the United States." Burke
offered no proof, and despite similar concerns expressed by other Chicago
pols, the city and Cook County will continue to use Sequoia equipment.
DISPUTED ELECTION
Sequoia officials insist that neither Chavez nor the Venezuelan
government has had any link to the company. "There is absolutely,
unequivocally no connection," insists Sequoia Vice-President Michelle M.
Shafer. But Sequoia's ownership is elaborate. The Oakland (Calif.) business
was acquired for $16 million in March, 2005, by Boca Raton (Fla.)-based
Smartmatic Corp. Smartmatic is owned by a Netherlands holding company,
which in turn is owned by Smartmatic International Group, based in
Curagao.
Sequoia says the Curagao company's principal shareholders are its
Venezuelan chief executive, Antonio Mugica, and his family. A large
minority stake is owned by other Venezuelans. "We were trying to make a
fluid company that could operate internationally," says Shafer.
The Venezuelan connection has fueled speculation among bloggers and others
in the anti-electronic-voting world about Smartmatic's role in a
controversial 2004 election to recall Chavez. The company received a $91
million contract from Venezuela's national electoral council to conduct
that vote, which Chavez eventually won. While Chavez opponents claimed
fraud, no U.S. critics have linked Smartmatic to corruption, and the
company strongly denies it engaged in any.
The U.S. criticism of Sequoia and its owners is just the latest spat in a
nasty battle over electronic voting. Most of the conflict concerns security
problems. "These major security holes have been there for a long time, and
they are not going away," says Holly Jacobson, co-director of Voter Action.
Her group has challenged electronic voting around the country in races won
by both Republicans and Democrats.
Still, the new machines are catching on, thanks in part to more than $2
billion in federal funds. The number of counties using electronic systems
has more than tripled since 2000, to 1,050. And public opinion surveys
suggest that most voters like them.
By Howard Gleckman
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