I was sitting in class this morning and the professor was lecturing the perils of outsourcing. He went on to give examples. One of them was that Southern Pacific had outsourced it’s data processing to IBM. IBM had screwed up something and caused SP to become bankrupt. I saw this in the textbook and asked him to name the source (he wrote the book). He couldn’t tell me and got real defensive. I think he just made up information.
Any way, has anyone heard of this?
Perhaps it’s an exaggeration.
RWM
Well, since SP didn’t go bankrupt, it’s obviously not quite right.
Someone associated with SP might have more information on this, but I know that SP did have a deal with IBM for data processing services (which UP terminated after the UP/SP merger). I don’t know how happy or unhappy SP was with this service, but it’s certainly a stretch to claim that it was a major cause of SP’s woes. SP’s problems in its later years had more to do with its unfavorable strategic position and its loss of some major sources of on line traffic, particularly in California.
I was there and it didn’t happen. I think your instructor should have been embarrassed.
Sheesh! Very unsettling, to say the least. Using his own text, too? How tacky is that! I guess we now know why it isn’t widely used at other fine colleges. [:-,]
-Crandell
Wow ! Good catch, and a gutsy call. Now you’ve learned something very important and in a way that you’ll never forget: If something important doesn’t seem right, perhapos you should go ahead and question it = ‘The Emperor has no clothes’ syndrome. People in authority are not always right, and sometimes negligently or deliberately wrong.
What kind of class was it - a business class of some kind ? He probably never expected that anyone who knew or cared would ever show up to challenge him. More generally, not all acadamecians are ‘as pure as the driven snow’ - there can be intellectual laziness and dishonesty there, too, in all of its various forms. Recall the several infamous cases of newspaper reporters faking stories over the past decade or so - e.g., Jayson WIliiams of the New York Times. In fact, that particular garden - academia - is the most likely place where that kind of thing happens, simply because that ‘publish or perish’ culture is where the most research and writing occurs (kind of like Willie Sutton’s famous explanation of why he robbed banks - ‘‘That’s where the money is.’’). You may have stumbled on a slob or a fra
mmmm–interesting–I heard this story as well–
I think that story may have entered the annals of business ‘folklore’ already. The story that the OP was referring to showed up as a talking point in one of my recent classes as what happens when an incident occurs and becomes mixfused with another concern—it is referred to as ‘Conflation’. The original concern was outsourcing–the conflation occurs when something unrelated is used as an example of outsourcing issues–in this case the misapprehended story of IBM’s ‘bankrupting’ of SP. BUT. It was more likely the real story may well have been the non-communicating computers of Penn Central.
I agree—nice catch!!
From the current Wikipedia article on Sprint Nextel [usual disclaimers apply] at http://en.wikipedia.org/wiki/Sprint_Nextel under GTE Sprint:
GTE Sprint
The Railroad had an extensive microwave communications system along its rights of way used for internal communications; later (after the Execunet II decision) they expanded by laying fiber optic cables along the same rights of way. . . . In 1972,
While I agree with you that academia has its share of fraudulent research (I’ve seen and heard plenty of phonies), the public is aware of that only because of the rigorous process of checks and balances (relatively transparent peer-reviewed journals) where the design is to uncover error (deliberate or not). The same cannot be said to be as common for corporate in-house research because of the nature of the set-up. Especially dangerous is funded academic research, especially by pharmaceutical companies where there is a built-in conflict of interest involving $.
Off-topic: One morning I was lecturing my abnormal psych class and couldn’t help hearing the history blowhard in the next room making an assertion (that the UK goal was to reconquer the US) about the War of 1812 that, as you say, didn’t sound quite right. I checked it out with a historian friend whose field is the War of 1812 and confirmed my suspicion. Altho
There are those who never quite got the role of computers in business, especially back when SP was still around: some suspicions, some ignorance, some predjudice. Manpower ran the railroad, did the driving and the clerking, so who needed computers? Those who fought the system could easily blame IBM for thier defeat. If SP were the only fallen flag of the decade, then perhaps the arguement had byte. But, so many others were merging or otherwise disappearing that you cannot pin the demise on IBM or anyother computer firm.
OK - to be fair, perhaps what he meant to refer to was the ‘meltdown’ / freeze-up of the operations of the merged SP-UP in the late 1990s. See -
Rising phoenix on a winged shield
Trains, February 2005 page 30
Union Pacific recovers from meltdown
( “FRAILEY, FRED W.”, MELTDOWN, OPERATION, RECOVERY, UP, TRN )
Who’s got the vision?
Trains, February 2002 page 34
a guide to Western railroading in 2002
( BNSF, DAVIDSON, “FRAILEY, FRED W.”, HAVERTY, KCS, MANAGEMENT, ROSE, UP, TRN )
Don’t mess with the big bird
Trains, March 2001 page 38
Union Pacific recovers from difficulties with SP merger
(
I have no idea what happened at SP. I do know of a medium sized trucking business that went under after dealing with IBM about 20 years ago.
Back then, Big Blue Ruled. IBM told the trucking firm that a new IBM program would run on their existing main frame. The firm was struggling and bought into IBM’s offer. IBM even ran an ad in a trucking industry magazine saying how they could bring such efficiency to others.
Ala VISTA, the old hardware could not handle the software as promised. The whole data system collapsed despite expensive attempts to alter the program and tweak the old mainframe. Of course, a new IBM mainframe would solve everything. No sale.
The problem was never resolved. The trucking company went out of business with a few months of installing the “improved” software. IBM was not the primary cause.
Deregulation, a union work force, and other market factors were the underlying causes. A bad data processing decision based on bad information by the vendor simply hastened the inevitable.
Or maybe the prof was thinking of the Kar-Trak ACI system*, which never quite fulfilled its promise ? But that was industry-wide, not just SP’s. See -
I too had a first-hand view of a small railroad service company’s accounting staff attempting in the mid-1980’s to transition from 1st generation main-frame batch-processing type data-processing and accounting equipment and programs, to more modern and flexible software and hardware. It was frustrating and not pretty, and several people departed as a result - some because they couldn’t make it happen, others because they weren’t getting the support - mainly $ - that they wanted and felt they needed to accomplish that. In his 1960’s management/ self-help book Up the Organization!, Robert Townsend (of Avis Rent-a-Car fame) wrote to the effect that he never knew of a company that got into trouble by computerizing too slowly; but knew of several that had died as a result of doing it too fast. Caveat emptor
I understand it’s off topic, but could you expand on these major SP traffic sources that were lost?
Thank you everyone. I knew this didn’t sound right. This professor is always telling everyone to site their sources. Go figure.
Do as I say, not as I do…[swg]
Major traffic losses included eastbound transcontinental fresh fruits and vegetables. eastbound transcontinental lumber, eastbound transcontinental set up autos, westbound transcontinental auto parts, forwarder traffic, I-5 southbound lumber and eastbound transcontinental processed food.
wholeman: The basis for statements such as the “professor” made should be made available to students if there seems to be some question about accuracy. That usually, but not always, should mean a citation of primary source, not a text. His refusal sounds defensive, to say the least. Without fear of exposure, is your school a university or community college? Is the department business or econ? Does he have a doctorate?
Especially considering that it was NOT the case that Espee failed and the ruins were picked up by UP. Both Companies were strong at the time of the merger…
OK, well maybe this can be a ‘teaching moment’ for all of us . . . [%-)]
After wondering why I hadn’t - I did the Google Advanced Search for ‘‘IBM’’ and ‘‘outsource’’ plus ‘‘Southern Pacific’’, and got about 2,460 results, one of which was that it was announced in Nov. 1993. Then here’s what appeared as part of a BusinessWeek magazine article* dated April 1, 1996:
‘‘Southern Pacific Rail Corp. suffered through myriad computer breakdowns and delays after outsourcing its internal computer network to IBM in 1993.’’
I’ll let each of you perform whatever further research you think is appropriate - such as finding whatever support may exisit for this statement - and draw your own conclusions, because I neither endorse or support it. For Original Poster wholeman, I’ll suggest that it might be fun to be able to know more about it and the sources than the prof.
But the original points and criticisms are still valid: SP never did actually go bankrupt; it’s financial difficulties didn’t happen solely or even mainly because of computer problems, as far as this co