IBM extends outsourcing business to R&D

From reporter Morgen Peck:

Nokia Siemens Networks has entered into an outsourcing deal that will hand over research and development activities in Munich and Berlin to IBM for the next six years. Both sides expect the transfer to begin by December of this year. The deal encompasses efforts in the development of NSNâ''s next generation voice and multimedia services, mobile Internet connections, and voice-over-internet services.

The announcement falls in line with a strategy that NSN has had since the companyâ''s birth in April, 2007 as a joint venture between Nokia and Siemens. At that time, NSN expected almost ten thousand of its employees to either lose their jobs or be handed over to business partners.

After December, IBM will control 235 NSN employees, about five percent of NSNâ''s workforce in Munich and Berlin, according to Stefan Mueller, an NSN spokesperson. IBM has not yet disclosed what specifically will happen to these jobs, although it says it will transfer entire developments teams.

In their new roles, the two companies will collaborate on product management, architecture, and technical support.

If the deal really transfers significant portions of NSNâ''s R&D over to IBM, it would be an unprecedented move and provide an interesting indication that NSN doesnâ''t consider its research and development to be a core function anymore, says Ron Hira, an assistant professor of public policy and corporate R&D expert at Rochester Institute of Technology, in New York.

But Martin Kenney, a professor at the UC Davis Center for Entrepreneurship, doubts this is the case. More likely, he says, itâ''s a way for NSN to cut production costs without being directly responsible for lay-offs and economic restructuring. â''I donâ''t see anything dramatic at all,â'' he says. â''It looks to me like this is a way of moving these German, relatively union-labor protected, folks out of the company.â''

This latest deal comes on the heels of a larger restructuring in July when NSN shaved off 2290 employees in Germany.

IBM has stated that it will eventually offer R&D outsourcing to other companies moving in the same direction as NSN.

Follow this link to see where IBM's R&D spending ranks amongst its corporate competitors.

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