Editorial: March 2004

By Ellen Pearlman

Sandwiched between 30 wallet-size pictures of ordinary Americans, the headline on the cover of the April issue of Fast Company magazine neatly sums up the growing hysteria surrounding the specter of offshore outsourcing: "Look into their eyes: These people lost high-tech jobs to low-wage countries. Try telling them that offshoring is a good thing in the long run." The Senate recently passed a measure restricting offshore outsourcing on the part of government contractors, while Senate Democrats are supporting a bill requiring companies to give employees 90 days' notice of plans to outsource jobs overseas. And the issue promises to remain at the center of this year's presidential campaign.

Unfortunately, companies of all stripes face increasingly fierce pressures to meet shareholder and Wall Street demands for earnings growth, as well as competition from rival firms that are cutting costs through outsourcing. What's a company to do? Believe it or not, there are alternatives.

Two and a half years ago, Merrill Lynch & Co. was reeling from the dual blows of the attack on the World Trade Center and the bursting of the Internet bubble. When the order went out to slash budgets companywide, the venerable brokerage firm's human resources executives turned first to the usual outsourcing suspects for advice. After all, many of their large-company cohorts had taken the outside route, and the savings of 20 percent or so everybody seemed to be getting from such deals looked pretty attractive. But Merrill took the road less traveled, deciding to go it alone. The result: savings of 50 percent of HR costs by cutting 500 jobs out of 1,100, reassigning a portion of the remaining staff to a newly built HR call center, and stitching together the nearly 150 separate human resources applications that used to hold the company's HR records. In this month's case study, Contributing Editor Jeffrey Rothfeder examines why Merrill made the decision to keep HR in-house, and how the company carried it out.

The results of our third annual "Role of the CIO" survey are in, and the march toward business-savvy CIOs continues. To further help our readers handle their business challenges, I've recently promoted Edward H. Baker to editor of the magazine and hired another executive editor, Brad Wieners. With their solid business backgrounds and knowledge of how technology generates financial payoffs, our coverage will continue to be laser-sharp, digging deeply into analyzing the decisions every CIO faces—whether you are bucking the trend or riding it to business success.

This article was originally published on 03-01-2004