
Iowa Spent $50M to Lure IBM. Then the Firings Started - forgotAgain
http://www.bloomberg.com/news/articles/2015-05-19/iowa-spent-50-million-to-lure-ibm-then-the-firings-started
======
wtbob
> It’s a blow to Dubuque and Columbia, cities that spent a combined $84
> million on tax breaks and other incentives to lure Big Blue in the hopes of
> attracting other technology firms and incubating a startup scene.

Anyone who would pursue IBM in hopes of 'incubating a startup scene' is, not
to put too fine a point on it, grossly incompetent.

> Instead, Ross found herself toiling on what she described as a new-age
> assembly line — each employee solving a narrowly focused part of a corporate
> customer’s technical problem and then passing the baton to the next person.
> As a result, said some of IBM’s Dubuque workers, they became experts only in
> a narrow set of skills that weren’t easily transferable.

That's exactly IBM's MO: try to solve problems with a smart process executed
by low-skilled people. Never mind that a process can never execute judgement,
and that low-skilled people executing a process never get the experience
needed to develop their own judgement. Never mind that deep knowledge is
necessary to solve complex problems.

From IBM's perspective, it's good to have low-skilled people who can't easily
find jobs elsewhere: it means lower wages and less turnover (and when there
_is_ turnover, imparting a few low skills to new hires is easy!). Never mind
that if other places wouldn't want to hire them, then one probably doesn't
have a reason to hire them either. Never mind that if one's company is
composed of low-skilled employees, then customers don't have much reason to
use one's services.

~~~
fennecfoxen
> Anyone who would pursue IBM in hopes of 'incubating a startup scene' is, not
> to put too fine a point on it, grossly incompetent.

Indeed -- and just one of the most painfully obvious illustrations of why the
"high taxes with favored big companies getting tax breaks" strategy is a lot
less fair and efficient than the "medium-low taxes for everybody" strategy.
(Of course, the latter doesn't give the politicians any chances to dole out
favors and toot his own horn for getting his constituents jobs!!!, so expect
ongoing cronyism well into the future. why capitalism gets a bad name...)

~~~
scarmig
There's a multitude of interpretations there, but to me the obvious(TM)
takeaway is that corporate taxes should be zeroed out for everyone, and
income/consumption/environmental taxes (take your pick of weighting) increased
to make up for it.

~~~
s73v3r
The company fucked over the communities is received tax breaks from, so they
should be rewarded with simply not having to pay taxes at all? What kind of
backwards ass thinking is that? If I don't pay my taxes next year, can I get
the same deal?

~~~
fennecfoxen
> The company fucked over the communities is received tax breaks from, so they
> should be rewarded with simply not having to pay taxes at all?

More like: "the politicians responsible for setting tax policy _routinely_ end
up abusing small companies with high taxes while rewarding big companies with
low taxes and claims of Jobs Jobs Jobs (re-elect me!). the jobs are frequently
a lie so mostly the big companies just get unfair advantages. this is
manifestly unfair to small companies and to communities. maybe politicians
shouldn't tax corporate activity at all -- besides the problems mentioned
already it reduces incentives to invest and to have jobs in a location -- and
we should get our taxes from economic activity once the money's left the
corporation, like the executives' property, or a sales tax that penalizes
excessive consumption, or carbon taxes -- which might also help the
environment! and then maybe we should charge companies fees for the services
that they use instead of general-fund spending so that companies have a harder
time offloading costs onto the jurisdictions where they're hosted."

This is a fairly common economically-conservative public-policy position. It
can be debated as desirable or undesirable, but!!! it is consistent and
coherent and does attempt to achieve equity under the law. It's probably
hardest to implement in a place like the US where there are multiple
jurisdictions involved and the revenue from a sales tax or property tax could
end up far away from the communities where the corporations impose costs
(though the fee-for-services model does mitigate that).

------
darkarmani
I can't believe no one mentioned this gem:

"Grassley, a Republican, wrote to Rometty on April 16 to express concern about
“reports of mass layoffs” even as IBM requested H-1B work visas to allow 5,800
foreign employees to be authorized to work for the company in the U.S."

~~~
at-fates-hands
I saw that too and was going to comment on it.

I'm starting to see a lot more companies who are starting to outsource their
work to H1-B's and even moving a lot of their work to India.

My sister worked at Cargill for 20 years and just recently found out her
entire department (enterprise application development) with all her developers
were being canned and the jobs sent over to India.

Hell, the current project I'm on, we have a team of 23 people and myself and
one BA are the only American born people on the team. The rest are all from
India and have to go back in a few months when their H1-B visas expire.

Two years ago, I found out Thomson Reuters were in the process of outsourcing
80% of their development in a combination of H1-B's and work going directly to
India.

I always thought as a developer my job would be relatively safe and I could
work in a nice stable corporate environment - guess I was wrong.

~~~
imaginenore
H1B is not outsourcing. They are full time local workers by definition.

It's amazing companies can get away with firing people and then hiring H1Bs,
who, by the government requirements, can't take a citizen's job place.

~~~
rhino369
The problem with H1B is that it is half-sourcing. Sure, they are full time
local workers, but they also lack the ability to quit and stay in the USA. So
they aren't truly part of the local job scene either.

The system needs to be changed so that a tech worker who gets pulled over can
quickly get residency and a path to citizenship.

I'd also make sure that anyone graduating from an decent American university
gets permanent residency. If we are going to let Stanford or UIUC charge these
people 40k a year to go to school and become some of the finest engineers,
they should be able to be American Engineers.

~~~
jpg0rd0n
H-1B status is a form of slavery for the visa-holder, unless they are smart
and get a second visa somehow. If an H-1B is terminated, they must leave the
country immediately - the employer's final responsibility to the visa-holder
is to buy them a plane ticket hom. They could potentially sue their employer
for wrongful termination but if they cannot stay in the country to pursue
their case, this is extremely difficult.

What is all means is that for an abusive employer, H-1B employees are perfect.
They are supposed to get paid more than the prevailing wage, but can be worked
to death, and effectively deported if they won't and can't do what they're
told to do.

------
djrogers
'Spent' is an interesting word here, given that this was entirely done in tax
breaks. It's not as if the state's coffers have $50m less than if they hadn't
done this deal at all - in fact it was still likely a net + for them.

If they hadn't given the tax breaks then IBM wouldn't have come at all -
bringing zero dollars with them. At least this way there are hundreds of
people employed, land being rented, utilities being used etc.

Oh, and according to the article the tax breaks were suspended when the number
of employees dropped too low - perhaps that minimum number could have been set
higher?

Obviously this didn't turn out as well as the state wanted it to, but it's not
like it actually cost them any real dollars in the long run...

------
simonw
"Instead, Ross found herself toiling on what she described as a new-age
assembly line -- each employee solving a narrowly focused part of a corporate
customer’s technical problem and then passing the baton to the next person."

Can anyone decipher the above and explain what kind of work IBM employees in
these kinds of offices perform?

~~~
wtbob
Mostly operations, I imagine: OS, database & storage administration.

While other companies were investing in their employee base, IBM was cutting
costs. Much like a farmer who eats his seed corn and then has nothing to plant
while others steward their resources carefully and see a bumper crop, IBM is
seeing the results of over a decade of underinvestment: who here would choose
an IBM cloud solution over AWS, Google, DigitalOcean or Linode?

While those companies were hiring smart people to design & implement well-
crafted systems, IBM was cutting, cutting, cutting, using human beings to do
work which is better scripted, underinvesting in automation and generally
setting itself up for failure.

~~~
amyjess
> who here would choose an IBM cloud solution over AWS, Google, DigitalOcean
> or Linode?

Why do you think IBM bought Softlayer?

~~~
brandonl222
Who?

~~~
amyjess
[http://softlayer.com](http://softlayer.com)

Surprised you haven't heard of them -- they're a pretty big player in the
datacenter space. Also, I know for a fact that a good chunk of Linode's
servers are actually hosted at Softlayer DCs (e.g. any Linode server hosted in
Dallas is physically at Softlayer's DAL-2 location, which used to be called
The Planet).

My best friend is a tech there, he joined right after the acquisition, and he
tells me that the word around the office is "IBM wanted to have a good cloud
business, so they bought one".

~~~
eropple
Yup. Between Softlayer as an IaaS provider and BlueMix as a PaaS provider, IBM
has top-shelf (not the best, but close) cloud talent and tooling.

They aren't sexy, which is probably why they don't get much play on HN, but
they're important and influential.

------
Killswitch
I live in Dubuque Iowa, and I'll say this, everyone knew IBM was only coming
for a short period of time. This was expected from everyone here.

Dubuque has a long history of trying to lure people here, and it's horrible.
First it was luring blacks from Chicago with free housing and prepaid credit
cards to up the minority count so the city could qualify for grants. Then it
was IBM.

Not much smart people here.

~~~
15155
> Not much smart people here.

I hate to break it to you..

~~~
Killswitch
Story of my life.

------
discardorama
" _cloud computing, which allows IBM’s corporate customers to fix problems
online rather than deal with human beings_ "

That's a new definition of "cloud computing". And you'd think that Bloomberg
would have figured it out by now, since the term has been around for years.

~~~
stox
Cloud, as in Blowing Smoke.

------
Geekette
If city officials bothered with a little research (assuming they don't already
know), they'd find several examples of Big Co. entering and leaving small
cities and towns without creating economic value equivalent to the huge
incentives used to lure them in. Very similar to how officials chase Olympic
hosting bids, even when history clearly shows that the legacy is additional
debt and underutilized facilities (e.g. purpose-built stadiums/villages that
only get used during the occasion).

Everytime I read of such schemes, I can't help but wonder how much lasting
value could have been created by using just a minute fraction of the money
wasted to foster the local startup/small business scene instead.

~~~
scarmig
Or even just leaving the money in people's pockets. I'm not a person who
thinks that all government destroys value, but this is a pretty clear example
of a time when the government extracted millions of dollars of productive
resources and poured it into an idiotic scheme.

Everyone would be better off today (except IBM's investors) if the city
officials responsible for this fiasco had just been given a free lifelong
vacation starting the day they started planning it.

~~~
djrogers
Why do you think any money was actually spent on this? These were tax breaks -
a reduction or elimination of tax payments that IBM wouldn't have made is they
hadn't moved in anyway. How is that taking money out of people's pockets?

~~~
Geekette
Tax breaks are just some of the incentives. E.g. Dubuque also renovated a
historic building for IBM, which cost money upfront.

That said, I think tax breaks ultimately cost money, especially when the
locals hired earn less than projected (thus, contributing less in income tax
to city and less in spending to local industries) while company enjoys little
to no tax, makes money and uses other municipal resources without adequate
contribution.

------
hharnisch
It was basically just a call center with sys admins that would remote into
servers and give them a kick when needed. Oh an a handful of developers. It
was clear as day they weren't going to stick around, since the more
interesting positions were being held in other IBM offices. It's a bit of a
shame really, there's plenty of smart/technical kids from Dubuque, they just
go to Des Moines and Cedar rapids to work at places like John Deere and
Rockwell Collins -- because even with IBM, there was no reason to stay.

------
fredkbloggs
Still waiting for a state's voters to pass a ballot measure that
constitutionally prohibits the state or any municipality within it from
establishing preferential/discriminatory tax regimes. If you want to put this
pandering to bed, it's surprisingly easy to do. Just be sure you're prepared
for the corporate money flooding in from all points of the compass to defeat
you with scare ads. Megalocorp knows it can't afford to let even one state do
this; then their game will be up.

------
jrmurad
> “Four years is light years in technology,” [the local official] said.

I wonder whether the journalist purposely used this as the article's final
sentence to demonstrate that politicians don't "get" science/technology... or
maybe relating a length of time to a distance slipped past the writer and
editor(s) as well.

~~~
jpg0rd0n
I thought that was a bit ignorant to throw in there too, but sadly, have
gotten used to seeing nonsense like that in "serious" articles.

------
rrich
Motorola basically did the same thing in a Northern Illinois community. I
think the massive site stayed open a little more than a year. It still today
remains a huge empty space sitting in the prairie some fifteen year on.

~~~
1123581321
Similar outcome, but happened for different reasons. The CEO lived in McHenry
and, essentially, wanted work to be closer to his house. When the plant was
closed, it was because Motorola had been fundamentally mismanaged, which is
different from IBM's cost-cutting to maintain its successful strategy.

I am in the Rockford area and saw a lot of friends suffer financially because
of Motorola's missteps. Rockford also competed with Dubuque to get IBM, and
for the same reasons (vague intentions to anchor a tech scene), but was
disqualified early in the selection process because it didn't have a minimum
threshold of college graduates.

------
kitd
It's the same for small suppliers as well, not just locations, depending on
large companies for business.

If the large company takes their business away, trauma normally ensues for the
small supplier/location.

I worked for an oil major who wouldn't do business with small suppliers for
this reason.

------
gtirloni
_incentives to lure Big Blue in the hopes of attracting other technology firms
and incubating a startup scene_

Based on unsatisfied ex-IBM employees? :-) they surely have the numbers.

