In 2009, in a bid to reinvent itself after failure of their staple farmlands in a dismal economy, the American states of Iowa and Missouri invested a total of $89 million to set up an incentivised industry friendly environment to attract companies to invest in their states. Their efforts were rewarded when the world’s largest technology services company, International Business Machines Corp. (IBM, Financial) decided to set up global delivery centres in Dubuque and Columbia promising employment opportunities to 1,300 and 800 locals respectively. The state administration and local community welcomed the technology major with open arms offering incentives worth more than $50 million and an overwhelming response to the recruitment drive.
But the dreams of the mid-western states that IBM would lead the way to a plethora of other technology firms creating a new industrial hub and tech firms incubation centre here, did not fructify into any long term gains, as IBM which was under pressure to automate business for facilitating cloud computing to customers, started cutting its staff just three years after the setup. In 2012, IBM’s chief executive officer, Ginni Rometty took the decision to invest in the demands of corporate customers of automated control instead of human assistance and started firing employees in their new delivery centres. The sacking has been on such a large scale that almost half of the total workers in these facilities have been fired leading to immense dissatisfaction and resentment amongst the communities. In April 15, the workers count in the Missouri centre fell below the threshold value of 500 for tax subsidies prompting suspension of tax credits for IBM while Chuck Grassley, the Senator of Iowa condemned the firing of over 700 workers from the Iowa centre.
Story of Small towns and big companies
The story of small hopeful towns looking up to big companies for employment opportunities and a boost in the local economy is common and unfortunately so is the case of shattered dreams, when the company that is under pressure in a competitive and demanding market, leaves. In the past, this series of events took years to play out, but now in the highly competitive technology sector with dynamic strategies and instantaneous changes, the disappointing end comes in just a few years.
The IBM tactic to cut down manpower in its rural delivery centres to keep up with latest demands, is not an anomaly. Ecommerce major Amazon.com, Inc. (AMZN, Financial) recently closed down two of its warehouses in rural Kansas and Nevada to implement its new strategy of same day delivery from centres closer to cities, while the Apple (APPL) employees in Phoenix, Arizona, are facing large scale layoffs as the Information Technology giant converts the originally conceived as an IPhone screen manufacturing unit into an automated data centre.
The Dubuque diary
Adam Pratt, an IBM representative emphasised on IBM’s commitment to constantly invest in skills that are needed by clients, currently the demands are in automated online facilities for Cloud, Analytics, Mobile, Social and Security. He offered no comments on the declining employee count in Dubuque and Columbia centres, nor did he expand on IBM’s future plans for these delivery centres and fate of the workforce.
With many dismally speculating that IBM may completely pull out of these locations, Dubuque locals sadly reminisce the hopeful expectations that the IBM venture would serve as a makeover for the Midwestern city transforming it into a technology hub from the stereotype of bales of hay in barns. At that time, with IBM guaranteeing average annual salaries of nearly $46,000 was almost double the local average income per capita as per the American Census Bureau, Dubuque was looking forward to an era of renaissance and prosperous growth for years to come. Alas, this tale did not have a happy ending.
