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IBM to Pay Employees $300 Million in Pension Suit

IBM last week agreed to settle with some plaintiffs in the five-year-old pension lawsuit filed by current and former employees. Under the agreement, IBM will pay the parties in the lawsuit $300 million, and the company's potential liability will be capped at $1.4 billion. In the lawsuit, Cooper vs. IBM, which was filed in the U.S. District Court for the Southern District of Illinois in 1999, current and former employees accused IBM of age discrimination when the computer giant switched to a cash balance pension plan.

Workers who had been with IBM for many years, and were just entering the years when their pensions would begin increasing the most, lost upward of 20 to 40 percent of the value of their pensions when IBM converted to the cash balance pension system. In the cash balance pension scheme, the total value of a worker's pension is converted into a lump sum that would then increase by a given percentage every year, much like a 401(k) plan. This means that, for older workers, age 40 to 60, who had already built up some value in their pensions, the rate at which their pensions built actually went down, which is illegal under pension law and formed the basis for the lawsuit.

Last year, the court ruled that IBM's cash balance formula is unlawful because younger employees would earn more years of interest by the time they become 65 than older employees would. The court also found that IBM had, in some cases, low-balled the conversion of its employees' pensions into lump sums. IBM is currently appealing that ruling in the Seventh U.S. Circuit Court of Appeals in Chicago. As for the settlement, IBM said it will take a $320 million charge in its third quarter, or 13 cents a share after taxes, as a result of the $300 million settlement and another $20 million pension-related settlement it entered into last month. IBM maintains it didn't do anything wrong in the conversion to a cash balance plan, and warns that many companies with such plans would be forced to slash benefits and lay off workers if they were found in court to be unfair.

Government Study Finds Offshoring Is Growing, but More Data Is Needed

A new government study indicates that offshoring is growing but there is not enough data to be certain of the total impact offshoring on the economy. The non-partisan Government Accountability Office analyzed the Department of Commerce's trade data and found that offshoring of IT jobs is indeed growing. From 1997 to 2002, the GAO found that offshoring of business, professional, and technical services grew from a $21.2 billion business to $37.5 billion, a 77 percent increase. What's more, the study found that outsourcing jobs to a subsidiary, what the GAO refers to as "affiliated trade," accounted for 71 percent of all IT outsourcing and is growing faster than unaffiliated trade, which grew at a 67 percent rate over the period. Among the different BPT services, computer processing, accounting and bookkeeping, and research and development jobs have grown the fastest since 1997, although, curiously, the amount of computer processing work being sent offshore actually declined from about $1.5 billion of work to $1 billion, from 2000 to 2002, while R&D grew steadily to $1 billion.

The GAO also looked at data from the Bureau of Labor Statistics and found that, from March 2001 through June 2004, in industries commonly associated with offshoring, like computer system design and accounting and booking, Americans lost jobs at a higher rate than industries not associated with the phenomenon. The average annual rate of decline over this period was 5.7 percent of all jobs in computer systems design and related industries, and 7.9 percent for accounting and bookkeeping, while during this period total nonfarm employment actually increased by two-tenths of a percent. The study also found that total projected U.S. employment for the period from 2002 to 2012 is 2.4 million jobs lower than what was projected. However, the GAO says it cannot, based upon available data, come to any concrete conclusions about how offshoring is affecting the overall economy, and specifically cited the collapse of the dot-com bubble as one of the key events clouding the employment picture.

SSA Reiterates Product Convergence Plan At Annual User Conference

SSA Global held its annual user conference in Philadelphia last week. Among the announcements made by the ERP software company, which has 13,000 customers, following several acquisitions, was a reiteration of the product convergence strategy it unveiled at the same event a year ago. CTO Cory Eaves said the company is on course for an early 2005 release of SSA ERP LX, the convergence platform for its collection of OS/400-based ERP packages, including BPCS, PRMS, PRISM, and Infinium; the other package, ERP LN, which includes the Baan, MK, and Manman ERP packages, was delivered in August. SSA, which filed in June to go public, also highlighted the delivery over the last 12 months of integration points between its two core ERP platforms and various applications that are part of its "extension" strategy, including business intelligence, CRM, product lifecycle management, supply chain management, and supplier relationship management. "We have delivered on our promise to enhance the value of our customer's currently installed systems and to protect their IT investment for the future," Eaves said.

Among other assorted announcements, SSA says it is now shipping a new module in its CRM package, called Collaborative Order Management, which allows companies to offer self-service order management over the Internet. Los Angeles-based Paper Mart has also licensed SSA's supply chain management software to improve purchasing and forecasting in its 130,000 square feet of warehouse space, SSA announced. SSA also announced results of a new customer satisfaction survey, which shows that 90 percent of customers that have chosen to maintain their relationship with SSA are generally happy with the vendor. The company's former president of the Asia Pacific and Japan region, Martin Ambrose, has been promoted to the position of global vice president of channels and business development, where he will manage SSA's channel activities and partnerships (including the one with IBM) and report to Graeme Cooksley, SSA's executive vice president.

B.O.S. Buys Manufacturer of Cellular Gateway Devices

Better On-line Solutions, which owns companies that sell iSeries connectivity hardware and software, last week announced it has acquired certain assets of Quasar Communication Systems, an Israeli manufacturer of cellular gateway devices that eliminate interconnection charges between cellular and landline networks. By directly connecting companies' GSM, TDMA, and CDMA mobile phone networks to the PBX system, Quasar's CelluLink products can reduce cellular phone bills by as much as 50 to 60 percent, says the company, which claims 150,000 gateway installations in 40 countries and $3 million in sales in 2003. B.O.S., which is also based in Israel, says that for 285,000 of its ordinary shares (worth about $500,000 at current share prices), it acquired the majority of Quasar's assets, including its products, intellectual property, licenses, and distribution channels. B.O.S. president and chief executive Adiv Baruch says the Quasar acquisition will help B.O.S.'s voice-over IP phone strategy. B.O.S. operates several business units in various markets, including its flagship BOScom subsidiary, which is responsible for marketing and selling iSeries controllers and emulation software. B.O.S. sells its VOIP telecommunications devices under the BOSaNOVA brand.

Fair Isaac to Buy Braun Consulting for $30 Million

Fair Isaac recently announced plans to acquire Braun Consulting. Fair Isaac, which develops analytics software for OS/400 and other platforms, plans to buy Chicago-based Braun for $2.34 per share, or about $30 million. Braun provides consulting and integration services to Fortune 1000 companies and specializes in CRM and business intelligence systems. Braun's founder and chief executive, Steven Braun, will stay on with Fair Isaac, which moved its headquarters from Northern California to Minneapolis in May. "Fair Isaac and Braun share a common view that a customer-focused, analytics-driven marketing strategy is the first step toward real marketing success," Braun says.

Magic Partners with IDS Scheer for Business Process Modeling

Magic Software and German software developer IDS Scheer recently entered into a comarketing and software integration partnership. Under the terms of the deal, Magic will work with IDS Scheer, which develops business processing modeling and performance software, to market IDS's ARIS product line. The agreement also calls for integrating iBOLT with the process modeling and performance management tools. "There is a perfect fit between the ARIS Toolset, ARIS Process Performance Manager, and iBOLT," says Avigdor Luttinger, who heads the iBOLT program at Magic.

Oracle on iSeries? It's Already in There

As the PeopleSoft-Oracle drama slowly plays itself out, the iSeries world is watching with baited breath to see if Oracle' chief executive, Larry Ellison, will get his hands on the OS/400 platform's premiere ERP system. Since Oracle sells a competing relational database system, it is widely believed that, if it does acquire PeopleSoft, it will not do much to enhance the World ERP system, which was designed to run--and run only--on DB2/400, the industry's first (and some would argue the best) relational database management system. And while there has been talk for years about porting Oracle's database to OS/400, that is about as likely to happen as Oracle paying big bucks to continue the development of the World ERP system (if Ellison should gets his hands on it, which looks more likely every day).

But what is interesting in all this mess is that Oracle's database is already running on at least one iSeries server, a highly placed source with one of IBM's high availability partners tells us. Of course, Oracle is not running natively on OS/400. It is running inside of an AIX logical partition on a V5R3 box. (Oracle has shipped versions of its Oracle9i database for Power/Linux servers and is working on a version of Oracle10g for Power/Linux machines as well.). It may be better to have an application and its database running on the same, familiar operating system, but, as we've seen with many EnterpriseOne installations, where application servers can and often do run on Windows boxes and the data stays on the OS/400 server, it is not necessary, and many shops save a lot of money by offloading application servers to CPUs other than those in their AS/400, iSeries, or i5 database machine. It would be interesting if Oracle decided to port its eponymous database to OS/400 proper and then make it available for World ERP shops as an alternative to DB2. But customers would have to double pay for their databases, since IBM does not break DB2/400 out as a separate item from OS/400.