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It's Still a See-Saw Economy

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As the economy wanes, IBM Global Financing serves up good year-end news for the SMB sector, while jobs decline and fraud plagues H-1B.

 

While the topics covered in this article could not be more disparate, they do demonstrate that we live in a global economy, in which an event or action--wherever it occurs--can have a kinetic impact upon the entire world.   

IGF Makes U.S. Economic Stimulus Package Stimulating for SMBs

The financial crisis on Wall Street has left most people reeling from shock and awe at seeing their 401Ks and other investments disappear before their very eyes. The U.S. Economic Stimulus Package, designed to, well, stimulate the U.S. economy, and signed into law in February, is now a distant memory.

 

However, What Many Did Not Know...

...about the U.S. Economic Stimulus Package is that businesses during 2008 (read: until the end of this year) can also benefit from "bonus" or accelerated depreciation on new equipment that is purchased and placed into service by December 31, 2008.

 

Information for businesses can be found on the IRS Web page, which provides information on the business provisions of the economic stimulus. Two videos and their accompanying transcripts are of interest. The first video is entitled Economic Stimulus Package: Section 179 Depreciation and comes with an accompanying transcript. The second video is entitled Economic Stimulus Package: 50 Percent Special Depreciation and also comes with an accompanying transcript.

 

They are both worth viewing for customers who are still on the fence regarding taking ownership of equipment this calendar year.

 

The Best-Kept Secret

Back in February, IBM's technology lending and leasing business segment, IBM Global Financing (IGF) also announced an Economic Stimulus Advantage Offering.

 

Old news you say? Read on. This story is particularly relevant in this fourth quarter because of another recently announced IGF program. But let's not get ahead of ourselves.

 

The IGF Economic Stimulus Advantage Offering is designed to benefit Business Partners and customers "...from new low rate and no charge deferral offerings on the acquisition of technology equipment," the company said. IBM customers "can receive either enhanced rates or a free three-month deferral on [36-month] leases of IBM and non-IBM equipment installed by 2008."

 

Why Wait?

Recently, IGF also introduced the "Why Wait?" technology financing offer. Unlike the Economic Stimulus Advantage Offering, this is a worldwide initiative that provides customers the opportunity to "take advantage of a 90-day, interest free payment deferral period, followed by a 36-month Fair Market Value lease with competitive rates on IBM System z10 Business Class (z10 BC), Power Systems and Storage either directly from IBM or through IBM Business Partners."

 

Noteworthy is that customers in the U.S. can receive additional financial advantage by combining the two offerings. U.S. customers can get an optimal rate on leases acquired through the Economic Stimulus Advantage Offering along with the 90-day deferral from the "Why Wait?" program, which is a "win-win" for U.S. customers. 

 

Two for One: Going Safe and Green

According to IBM, the "U.S. Economic Stimulus Package is also an opportunity for U.S. customers to take advantage of IBM Global Asset Recovery Services (GARS). Under this program, IBM can manage the buyback and disposal of excess or existing technology, replacing it with new technology in order to potentially benefit from the enhanced lease and financing terms in the Economic Stimulus Advantage Offer." The GARS program, which earns $1.5 billion a year in revenue, also provides customers with a "green" alternative as equipment is both scrubbed of data (to the security level requested by the customer) and then disposed of in an environmentally friendly manner. Customers can also obtain a buyback quote for unwanted eligible existing systems from the IGF Online Buyback Tool.  

 

Analysis

Many businesses, especially SMBs, wait until fourth quarter to make hardware purchases or leasing agreements. Many this year are deferring purchasing decisions or abandoning them altogether because of the economic debacle. For those hardware purchases that were designed to help the business become more viable, remain competitive, and have a positive return on investment (ROI), it may make good business sense (for those customers in the U.S.) to take advantage of both the U.S. Economic Stimulus Package and the IGF Economic Stimulus Advantage Offering before they expire. The depreciation tax breaks and lower finance rates make this an optimal time to deploy mission/business systems that have the potential to grow the business.

 

If the SMB is dealing with a reseller, it behooves them to ask about both the IGF enhanced rate and the 90-day deferral. Likewise, it behooves resellers to publicize the IGF offerings to positively impact their sales revenues for fourth quarter.

 

The Picayune Part

The U.S. Economic Stimulus Package indicates that equipment purchased or leased must be "placed into service" by December 31, 2008. "Placed into service" is a bit of a vague phrase; I have spent much time and gnashing of teeth trying to deconstruct it to determine its exact meaning. I have researched and probed and was told by one accountant that it simply means there is a "physical presence." And what does that mean? While I am not sure if anyone else is concerned with this piece of minutia, I am. My point: it would do customers well to consult with their tax accountants or legal counsel as well as look to financial audits to determine whether the box can be on the loading dock on December 31 as long as there is a bill of lading and a certificate of acceptance (COA) between the customer and the vendor or whether the box has to be plugged in and booted with a 2008 time stamp--or any phase in between. It is better to be certain than sorry.

Jobs: Now You See Them, Now You Don't

On November 7, 2008, the U.S. Bureau of Labor Statistics reported "...payroll employment fell by 240,000 in October. Job losses over the last three months totaled 651,000." It added that "[i]n October, the unemployment rate rose from 6.1 to 6.5 percent, and the number of unemployed persons increased to 10.1 million." The New York Times reported that U.S. Jobless Rate Hits 14-Year High with a total year-to-date job loss of 1.2 million.

Rethinking H-1B and Offshoring

Adding insult to injury, Kevin Fogarty of e-Week writes in his article, "Abusing the H-1B System to Fix the Washing Machine" that the Department of Homeland Security (DHS) admits that there was likely error or fraud in some 20 percent (some say more) of "H-1B visa applications filed by U.S. employers seeking foreign technology workers." Fogarty indicates that the DHS audit of H-1B visa applications revealed phony education degrees, forged letters, fake qualifications, and fictitious references and work histories on applications filed by U.S. companies.

 

To clarify what an H-1B visa is, I checked the U.S. Department of State Web site, which provides explanations of several categories of nonimmigrant visas awarded to persons who desire to work in the U.S. temporarily. The site describes the H-1B classification as applying "...to persons in a specialty occupation, which requires the theoretical and practical application of a body of highly specialized knowledge requiring completion of a specific course of higher education. This classification requires a labor attestation issued by the Secretary of Labor. This classification also applies to Government-to-Government research and development, or co-production projects administered by the Department of Defense."

 

Hmmm. Is it just me or is there really something wrong with this picture? First off, according to several pundits, U.S. companies refuse to train their IT professionals for several reasons, not the least of which is that they think they'll jump ship the first opportunity they get or that they (we) are not worth training because IT is disenfranchised within the enterprise. Yet, these same employers have no problem recruiting presumed talent from abroad, which if they tried they could find and/or nurture closer to home. And, yes, while the up-front cost may be a bit more, investment in homegrown IT staff will pay off in the long run.

 

For purposes of complete disclosure (and at the risk of inviting searing riposte from MC Press's illustrious readership), I have no problem with a global economy in which the right people are hired for the right jobs, there is oversight and ethical behavior, and companies (and governments) are working in collaboration for the better good--including the bottom line--of all. What I have a problem with is overt and palpable greed, which is often based on flawed and misleading analysis and even more specious (or no) metrics (at all). I remain an eternal optimist.

 

Bottom line: while the topics discussed in this article are very diverse, the common thread they share is vision. First, the vision to move beyond analysis paralysis and move forward on mission/business projects that will likely have a positive impact on the health of your business, its bottom line, and its ability to better compete in this global market either now or when the economy rebounds. The U.S. Economic Stimulus Package combined with the IGF Economic Stimulus Advantage Offering presents an attractive financial and competitive opportunity for SMBs.

 

Second, HR, IT, and other line-of-businesses (LOB) executives today have got to get a vision and a grip on their HR practices and not march like proverbial lemmings to the proverbial sea--or overseas. Outsourcing--whether it's offshoring, near-shoring, H-1B, or whatever moniker/classification you use--has benefits and burdens. The fact that it may, on the surface, appear less expensive is no reason to believe that it is. A thorough analysis, taking a lot more factors into consideration besides cost, is imperative and paramount to sound decision-making.

 

MC Press does not, nor intends to, offer or provide tax, accounting, or legal advice to its readership. Customers are urged to consult with their own financial advisors and legal counsel.

MARIA DEGIGLIO

Maria DeGiglio is president and principal analyst of Maria A. DeGiglio & Associates. Current clients of Maria A. DeGiglio & Associates include the Visiting Nurse Service of New York ; Experture, LLC; and MC Press. Ms. DeGiglio has more than 20 years of experience as an IT consultant, industry analyst, and executive. From 1997 to 2005, she worked for Andrews Consulting Group and the Robert Frances Group.

 

Ms. DeGiglio received her Masters Degree in Health Advocacy from Sarah Lawrence College and graduated Cum Laude from Cornell University with a Bachelor of Arts Degree.

 

 

Ms. DeGiglio has worked with IT and C-level executives to enable IT alignment with business goals and to implement best practices. She has experience and expertise in both large enterprises and in small- and medium-sized business. Ms. DeGiglio has authored over one hundred articles, reports, and white papers.

 

 

Since 2004, she has worked in the healthcare industry and in health IT investigating the legal, ethical, and regulatory aspects of creating, implementing, and exchanging electronic health records (EHRs). Ms. DeGiglio is an expert in security, privacy, and HIPAA regulatory compliance.

 

 

Ms. DeGiglio may be contacted at This email address is being protected from spambots. You need JavaScript enabled to view it..

 

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