IBM Still Mired in Layoff Spiral

By Darryl K. Taft
2009-02-03

IBM Still Mired in Layoff Spiral
( Page 1 of 2 )

As IBM continues to quietly lay off more than 4,800 workers, the company takes another blow to its image as documents leak about an effort called Project Match. Project Match helps IBM's U.S. and Canadian employees find jobs in countries where IBM is expanding, such as India and China, while IBM eliminates positions in the United States. Robert E. Kennedy, a professor at the University of Michigan's Ross School of Business, says global sourcing and offshoring are realities that IT infrastructure and software companies like IBM and their employees must come to accept. Also, as high-tech layoffs continue, what impact will there be on H-1B workers?

IBM continues to lay off employees and to take heat from employee groups for its practice of not providing more information such as exact numbers or other particulars on the layoffs. The word is IBM has eliminated nearly 5,000 positions since the action began in January, according to sources.

An IBM employee organization called Alliance@IBM says IBM has laid off more than 4,800 people, including 1,449 in Sales and Distribution, 1,419 in the IBM Software Group, 1,200 in IBM's Systems and Technology Group, 307 in IBM Finance, 193 in IBM Research, and 92 in human resources.

Meanwhile, according to reports, IBM has an effort called "Project Match" that aims to help IBM employees in the United States and Canada move overseas to work for IBM, or essentially "offshoring" themselves.

Although the Project Match initiative has been characterized as an either/or solution—where IBM employees are encouraged to either accept a job in India (or elsewhere) or lose their positions in the United States—it does not appear to be exactly that.

Of course, word of Project Match leaking as IBM is in the throes of a broad-based layoff that is a potential source of embarrassment for the company. The goal of the program—as stated in a document describing the program obtained by eWEEK—is not simply to displace workers or present them with unpalatable

The document says, "IBM has established Project Match to help you locate potential job opportunities in growth markets where your skills are in demand."

According to the document, countries where opportunities are available include Argentina, Brazil, Mexico, Czech Republic, Hungary, Nigeria, Poland, Romania, Russia, South Africa, India and China.

In addition, the Project Match document said, "Should you accept a position in one of these countries, IBM offers financial assistance to offset moving costs, [and] provides immigration support, such as visa assistance, and other support to help ease the transition of an international move."

Moreover, the document said:

Project Match is a fit for IBMers who are:

Eager to broaden their career and develop new business skills by living and working abroad—a valuable commodity in today's global economy.

Excited at the prospect of contributing to a developing economy, potentially taking on different job responsibilities.

Open to new experiences and cultures.

Satisfactory performers who have been notified of separation from IBM US or Canada and are willing to work on local terms and conditions.

Indeed, that last point is the kicker, as it points to employees who have been notified of "separation" from the company. Yet, IBM officials say Project Match is not intended as a primary outlet for such employees for a number of reasons—among them that the number of Project Match positions is limited.

Robert E. Kennedy, author with Ajay Sharma of a book on offshoring called "The Services Shift: Seizing the Ultimate Offshore Opportunity," executive director of the William E. Davidson Institute and the Tom Lantos Professor of Business Administration at the University of Michigan's Ross School of Business, told eWEEK he believes IBM has simply come to grips with the new global economy and is making use of talent available throughout the world to reach maximum productivity and efficiency.

In Kennedy's view, asking IBM to refrain from employing overseas workers directly affects U.S. consumers, slows innovation and hurts the company's overall health.

Regarding the IBM layoffs, Kennedy told eWEEK, "There are at least two big pressures driving this. One is, by far, there is an economic downturn and IBM sales are suffering so they have to make cuts. And two is that globalization has come to the service sector and IBM knows it can move some jobs offshore."

IBM has been "very aggressive" over the last five years in expanding in India, but also—up to now—has been keeping its employment level steady in the United States, Kennedy said. However, the jobs offshored to India have been primarily transaction-oriented jobs such as accounting and back-office functions or technical specialties such as SAP programming, he said.

"But I'd say about 80 to 90 percent of what's happening now in terms of IBM layoffs is from the business downturn," Kennedy said. "In terms of laying off sales and distribution personnel, that function is done locally. They can't move that—so at least for that part of the layoffs, that has nothing to do with offshoring."

However, for IBM Software Group layoffs, "it's a little harder to tell," Kennedy said, noting that some of the software group efforts such as "work that has to be done close to the customer like needs analysis and requirements" cannot be offshored, while other software development activities can be.

Kennedy compared the current situation in services and technology to that of the textile industry. He said there used to be more than 3 million people working in the textile industry in the United States. "But it makes more sense to do textiles in a low-income country," Kennedy said. "Would you rather pay $10 for a t-shirt made in South Carolina or $5 for one made in Sri Lanka? Consumers want the $5 shirt. If we shift to services it's the same thing."

Kennedy said he grew up in Omaha, Neb., which used to be the call center capital. But it was still relatively expensive and inefficient when compared with India, he said. A call center employee in India might cost $400 a month, whereas one in Omaha might cost up to five times that, he said. Plus Indian call center employees on average are better educated and thus make fewer mistakes and require less supervision than their U.S. counterparts, which makes for a less expensive, more efficient operation, he said.

"In the long run, the only way for this country to raise incomes is to have us do more and more productive things," Kennedy said. "Or put another way, the only way to raise living standards is to move out of low-productivity activities into high-productivity activities. And it's the low and middle value-added sectors moving offshore."

For instance, "GM is stuck with high-cost, medium-skilled engineers," Kennedy said. "That's one reason it takes GM seven years to go from concept to design to the showroom floor [to produce a new car model], whereas it takes Toyota only three years. If they were more into tapping into the best talent wherever it is in the world, GM would be in better shape today."

Likewise, "IBM has to employ people all over the world to service those customers in those countries they sell to," Kennedy said.

He added that he believes the reality for companies like IBM is that they need to find workers who can do the work efficiently and effectively. Sometimes workers who represent the best combination of talent and lower cost are in the United States. Other times, they are located overseas, Kennedy said.

However, he said, "I'm not really pro-global sourcing or offshoring; I'm not a cheerleader for it. But it's a trend that's happening and smart managers have to be able to understand it."

Meanwhile, layoffs at companies such as IBM have yet another consequence for some employees—particularly those with H-1B visas. When H-1B visa holders in the United States lose their jobs, they must leave the country.

The H-1B issue has long been a source of contention and that is no less the case in the current recession, when major technology companies are being forced to lay off highly skilled employees. In fact, some are calling for companies to let H-1B visa holders go before they lay off American workers.

Sen. Charles Grassley (R-Iowa) even wrote a letter to Microsoft CEO Steve Ballmer in January calling for Ballmer to "protect" American workers. Microsofthas announced plans to cut up to 5,000 jobs. However, Microsoft Chairman Bill Gates has argued before Congress for increases to the cap on the number of H-1B visas allotted each year. Microsoft has been one of the top employers of H-1B talent over the last few years, with IBM not far behind.

IBM: 2 rounds of layoffs in 6 days

IBM has had two rounds of layoffs within the past two weeks, a company spokesman said.

“We did this last week on the 21st and today,” said IBM spokesman Doug Shelton, referring to the layoffs.

Shelton would not comment on how many IBM employees were laid off, what departments they worked in and where they were located.

Published reports say IBM cut 2,800 jobs in sales and software. On Wednesday, the state Department of Labor's Office of Dislocated Workers Program received a notice from IBM that 274 of the workers were in IBM's East Fishkill plant. The reason the company gave for the cuts, which are scheduled for April 27, was "economic."

“I can confirm that managers have begun discussions with some employees in North America about the need to remix our skills and people need based on what our client needs are,” Shelton said. “That will result in some job eliminations. Those employees that are affected have the opportunity to look elsewhere within IBM for jobs that might match their skills or interests.”

He declined to locate where IBM is hiring. IBM has 386,558 employees.

The company last week reported record fourth quarter earnings of $4.4 billion, or $3.28 a share, despite a 6.5% revenue drop to $27 billion.

The Armonk, N.Y.-based company (NYSE: IBM) conducts research at the state University at Albany’s College of Nanoscale Science and Engineering.

Union: IBM layoff count nearing 3,000 this week

Vendor confirms cuts are being made, after assessment of internal 'skills and resources'

anuary 23, 2009 (Computerworld) Microsoft Corp. and Sun Microsystems Inc. aren't the only top IT vendors laying off employees this week. IBM may have quietly let more than 2,800 workers go, according to the Alliance@IBM union, which expects even more job cuts at the company.

Lee Conrad, a former IBM employee who now is national coordinator of Endicott, N.Y.-based Alliance@IBM, said the layoffs currently appear to be happening primarily in two IBM units: its software group, and its sales and distribution operations. But Conrad said he expects the cuts to spread to other units in the coming weeks.

Alliance@IBM, a Communications Workers of America local that doesn't

have enough members to gain official recognition as a bargaining unit, is getting its information from employees who said they have been laid off. Many are also posting accounts of what's happening at the company on the union's Web site.

Unlike Microsoft, Sun and other technology vendors that have announced layoffs recently, IBM is being reticent about describing its workforce actions and the reasons for them. "We are not going to discuss specific numbers or locations," IBM spokesman Doug Shelton said in a statement, adding that company officials expect some of the affected workers to find other jobs within IBM and that they're "helping them with that effort."

Shelton also avoided the word layoffsand described the cuts as the result of an ongoing workforce skills evaluation process. "IBM continuously evaluates its mix of skills and resources throughout the year and makes changes as needed," he said. "The nature of our business is such that we must constantly assess employee skills and resources and at any given time give IBM the flexibility to match the current and future needs of our clients."

The Alliance@IBM site had been buzzing with rumors about the likelihood of layoffs at IBM for several weeks. The ongoing cutbacks are taking place in the same week that the company topped Wall Street expectations by reporting a 12% profit increase for last year's fourth quarter. IBM reported a 6% year-over-year decline in revenue, to $27 billion, although that was caused in part by the strengthening of the dollar against other currencies.

Despite the generally upbeat earnings report, Andrew Bartels, an analyst at Forrester Research Inc., said there were some dark clouds in it that may be prompting IBM to take action to cut expenses.

For instance, revenue from IBM's hardware business was down 20% in the fourth quarter, a decline that reflects the worldwide economic slowdown, Bartels said. The stronger dollar is also hurting revenue overseas, he pointed out.

Last year, IBM and other IT vendors "were too optimistic about the economic and tech environment," Bartels said. But that has changed, he added. Vendors now "are very worried about the recession being longer and deeper [than expected], and [it's] causing CIOs to cut back even further," he said. "So you're starting to see vendors anticipate weaker growth and demand."

Bartels also speculated that IBM could be positioning itself to make an acquisition, and he pointed to offshore outsourcing vendor Satyam Computer Services Ltd. as possible target. The Hyderabad, India-based Satyam outsourcing firm has been rocked by an accounting scandal after its now-former chairman disclosed earlier this month that the company had substantially misreported its earnings for several years.

Microsoft yesterday announced a plan to lay off 5,000 employees, after its fourth-quarter earnings dropped by 11% year over year. Also on Thursday, Sun disclosed that 1,300 employees were given layoff notices this week, the first wave of a 6,000-worker reduction that the company announced in November.

In addition, Intel Corp. said on Wednesday that it plans to close four chip plants and cut as many as 6,000 jobs.

IBM bringing 1,300 jobs to Dubuque

By Dave DeWitte The Gazette dave.dewitte@gazettecommunications.com

A new IBM technology service delivery center announced Thursday in Dubuque is expected to employ several hundred workers by the end of this year and 1,300 by the end of 2010.

The center in Dubuque will provide server systems operations, including maintenance and monitoring of computer hardware and software systems, for IBM clients in the U.S. and around the world.

IBM Senior Vice President Mike Daniels said Dubuque was selected for IBM's center based on its "strong positive public-private partnership," competitive business model and talent recruitment base.

"During this time of economic uncertainty, IBM continues to invest in its future and recruit the skilled people it will need to grow its business," Daniels said. He said the Dubuque center will be a "model for creating new opportunities."

IBM signed a 10-year lease in the historic Roshek building in downtown Dubuque, with options to extend it beyond the initial lease period.

The building was leased from Dubuque Initiatives, a non-profit public-private partnership that acquired the building.

IBM plans to upgrade the building to make it compliant with green standards. The renovation will use IBM's own energy-efficient technology and data center design.

An incentive package was put together by the City of Dubuque, Dubuque Initiatives, the Greater Dubuque Development Corp., and the state.

The Department of Economic Development board will take action next month on $22 million in proposed state incentives for the project. The incentives include $11.7 million in direct financial assistance based on a $9,000 forgivable loan per job; $8.5 million in Iowa New Jobs Training funding through Northeast Iowa Community College, and $1.85 million in the form of an Iowa New Jobs Training tax credit.

"Today's announcement is about three things — jobs, jobs, jobs," Gov. Chet Culver said. He said the announcement shows that more businesses are discovering the advantages of Iowa's business climate and quality of life.

Dubuque Mayor Roy Buol said he was proud and especially thrilled with the role played by Dubuque's sustainability initiative in IBM's decision.

"IBM's decision to locate in the Roshek building, through adaptive reuse of a historic structure in the heart of our downtown, illustrates our shared commitment to sustainable development, historic preservation and community revitalization," Buol said.

IBM will work with institutes of higher learning in the tri-state area of Iowa, Illinois and Wisconsin for recruitment and training of potential employees. 

n Contact the writer: (319) 398-8317 or david.dewitte@gazcomm.com 

Layoffs at IBM in Essex Junction

Some IBM employees reporting for their shifts in Essex Junction Tuesday got the news that they were being let go.

IBM officials have now confirmed the layoffs. The affected workers are what are called long-term supplemental employees.

It's the latest in a series of cutbacks this year.

Back in June, 180 employees were laid off -- 70 long-term supplemental employees and 110 permanent positions.

And in August, it was paychecks that were cut. The company announced it would eliminate a 20 percent premium given to manufacturing employees who work 12-hour shifts. That is scheduled to take effect in January and affects 3,500 employees at IBM plants in Essex Junction, Fishkill and Poughkeepsie, New York. IBM officials told us at that time that the move was a cost-saving measure designed to keep the company competitive in a tough economy.

Wipro Lay off: Wipro Fires 1000 employees

Wipro, the top Indian IT Giant, has decided to go for a massive Wipro lay off. As per the news that has come out, it seems that Wipro has fired around one thousand people citing non-performance. That constitutes around 4 to 5 % of the entire Wipro Workforce which have been put under the scanner for performance reviews. Is this the time for the Indian IT industry for consolidation?

While some would be given counselling to improve their performance, others would be asked to leave.

As per the news sources, Wipro’s corporate vice-president (human resources) Pratik Kumar confirmed the move. Asked how many employees had been asked to move on, he said the company did not disclose that number, but it was "significantly lower than 2,000". "I can’t comment on a particular number," Kumar said, when asked to comment.

Seems like every company has got a reason in the name of "Regular Exercise" or "Based on Annual Performance Review". The fact remains the same that all these things are being done primarily for cost cutting. With severe dependency on US markets, which are seeing a big problem, the Indian IT secotr has been worst hit. "It’s a regular annual exercise. As the appraisal cycle gets over, a multi-layer review happens. Following that, people who have fallen in the lower quadrants of performance are put on watch. Some are asked to pull up and others are asked to move on," he said.

The review includes all the 60,000 global IT services employees from the senior leadership team down to the person with one-year experience.

Recently, TCS created a big uproar by deducting the salary of employees or going for a salary cut. In India, it was TCS which went for a TCS layoff following TCS salary cuts. Then it was IBM which axed 700 jobs across all over India.

In February, Tata Consultancy Services (TCS), the country’s largest IT services firm, had given pink slips to 500 non-performers. IBM, too, had asked about 700 employees in India to leave, citing non-performance. In July, Patni Computer Systems had shown the door to 400 employees. While IT companies said the move was not linked to the slowdown in the US, a key market for IT services, there was a consensus that it was time for belt-tightening.

IBM layoffs hit RTP

IBM has laid off about 30 workers in Research Triangle Park, a company official confirmed Wednesday.
The job cuts were part of a round of 150 cuts IBM (NYSE: IBM) made across the country.
They represent a fraction of the technology company's local work force. IBM is the largest employer in Research Triangle Park, where it has about 11,000 workers. The company has about 120,000 workers in the U.S.
Spokesperson John Buscemi declined to provide details about the laid-off workers.
"IBM continually evaluates its skills and needs and balances them against the needs of our customers," he says. "And so a resource action" - IBM's corporate term for layoffs - "was part of that."
Affected employees will have the chance to look for other jobs within IBM, Buscemi says. Those who don't find jobs will be offered severance packages.

Layoffs loom in IT majors, techies panic

Bangalore: The IT industry has some job worries. More than 500 IBM and TCS employees across the country have been retrenched. This has techies in the IT industry uncertain about their future.

Worried IT guys writing, speaking their mind on blogs. This is what dominates the cyberspace these days. Well, at least in the techies' domain.

The worry stems from the recent retrenchment of many like them from the TCS and IBM.

Though many like Akhil (name changed) who works in IT firm, don't feel alarmed yet, the truth is – the younger crop IS apprehensive.

And with the gossip mills running riot, many in the industry feel their future may not be as secure as they once thought it to be.

Akhil says, "The panic hasn't as such set in. Among the fresher there might be a certain amount of wariness."

However, industry leaders dismiss the retrenchment of more than 500 IBM and TCS employees across the country as routine - a part of quality control.

You underperform and you get sacked. They say it has little to do with the rising rupee or the slowdown in the US economy.

Customer XPs CEO, Rivi Varghese says, “As an industry grows higher up the chain, it is but natural that a small percentage of the people will not be able to keep pace with that. So it is a question of expectations not being met."

Let's not panic yet - that seems to be the message being sent out by young techies to their friends and colleagues in the industry but having said that the IBM, TCS exodus has made the situation deeply disturbing.

IBM Layoff, IBM cuts 700 Jobs, IBM Job cuts

Multiple layoffs occurred in Burlington VT, Endicott NY and Austin TX
today. They appear to have been a long time coming as several of the
former employees mentioned spending the better part of 2006 training
their replacements to perform the tasks for which they alone were
responsible.

Rightsizing is not uncommon and often used by companies to get rid of
a few bad apples - or even one - while avoiding discrimination or
other charges (By no means am I saying all those laid off were bad
apples). It isn't clear how many folks were let go today, but there
hasn't been any news coverage of it in any of the cities where it
occurred. That leads me to believe that this is planned and not
substantial. (edit 12 Sept 2006: article in NY newspaper speculates
the number of worldwide layoff to be between 500 and 700 people. Some
employees are with the IBM-Endicott tech group but it isn't clear if
all are)

I found the discussion at the IBM board at Yahoo! about the layoffs
interesting. It is obviously worth noting that disgruntled and
emotional former employees are not impartial in their criticisms, but
some of the critiques were interesting to me.

The link to the thread is here. The UI is kind of distracting but you
can change the appearance to suit you using the view menu. Here are
some highlights:

"I once had a PDM, during a moment of rare honesty, once tell me that
IBM now did not expect employees to be in a long term status, rather,
a short term association."

You don't have to tell me how IBM has changed, I'm a 2nd-generation
IBMer. I grew up going to the "IBM Christmas parties" where they would
hire out a big auditorium and fill it with piles of presents, sorted
by age and gender, for kids of employees. That IBM is long, long gone.

Of course I was/am a commodity, treated like garbage - thrown out when
the usefulness is gone.

In my case, I have identical skills as my co-workers who remain - C++
Object Oriented programming, with 4 years of Java experience as well.
Very current skills. However, the guy in India does same for fraction
of my pay, and I'm one of the first in my area to train a guy in India
- and yes, alarm bells went off in my head this spring when I was told
I had someone to "help" me with the software component I owned.

I had my desk cleaned out 10 days ago, in case it was a "march you to
the door" layoff.

Good summary of IBM resource situation. Result:

"This lack of retention of experenced employees, and teh(sic) constant
resource shifting churn, IMO is one of the reasons IBM executes poorly
globally."

This result has been proven for years by the break even or worse
performance of services (IGS type) despite the best excuses and
financial face lift that IBM financial engineering can muster.

All the profits come from divisions with minimal cross tower requirements.

That last line is telling and seems to be true. I don't think the IBM
jams are unifying the company fast enough or thoroughly enough to make
consequential change.

Indian IT firms battle to attract talent: survey

Cringely catches IBM trying to hire 15,000

By Ashlee Vance in Mountain View → More by this author
22 May 2007 20:11

Comment Those of you afraid of Robert Cringely's claim that IBM will layoff 150,000 workers might want to read his latest column. The PBS scribe has blown it again.

At the bottom of a piece on Google, Cringely returns to the IBM layoff topic and makes the following statement: "Last week IBM also posted more than 15,000 new positions on Yahoo HotJobs. If these jobs are real and IBM foresees stable employment numbers, won't 15,000 existing IBM employees have to leave?"

You might wonder how IBM hiring 15,000 workers, while also laying off 15,000 as Cringely suggests, would really back up the claims about a severely reduced US workforce. As we see it, that would leave IBM with the same number of staff in the US.

Don't spend too much time pondering that idea though because the 15,000 jobs don't really exist anyway.

It seems that Cringely simply typed "IBM" into the Yahoo! HotJobs keyword search bar.
Try it yourself, and you'll find that, yes, 15,081 jobs are up for grabs.
Of course, a huge chunk of those jobs aren't really tied to IBM corporate at all. For example, Spherion wants an IBM storage expert and Cisco wants an IBM project intern.
Cringely might have got a more accurate account by sorting the results by company and focusing on IBM. Do that, and you find 12,859 jobs at Big Blue.
We'll grant you that's still quite the total.

But, according to spokesman Fred McNeese, IBM typically has only 3,000 job postings up at any given time. Many of the jobs on Yahoo!'s board are repeat offers for the same position just in different cities. Search for "Software IT Architect", for example, and you find 22 listings for the position in towns such as Los Angeles, Houston and New York. When all is said and one, IBM is looking for close to 3,000 staff via Yahoo! - just like it always does.

Cringely also attaches a time element to his claim, stating that the jobs appeared "last week."
Er, again, that's not true. The job posting dates on the HotJobs site change from day-to-day. For example, almost all of the IBM jobs appear today to have been posted today. We're sure the same thing held true when Cringely checked the site last week. IBM clearly doesn't want people to ignore the openings because of an old posting date, so Yahoo! tweaks the postings every day.
One mistake as part of Cringely's fear-mongering campaign would be fine, but that's not what we're dealing with.

Cringely's original story on the IBM layoffs claimed that 150,000 US workers would be fired. Thing is, IBM only employs 130,000 people in the US. Cringely also claimed that all the layoffs were taking place under a project code-named LEAN. Those familiar with Six Sigma will know that Lean is simply the term associated with cutting waste out of business practices and not some nefarious culling program developed by IBM.

Cringely has done so much for technology over the years, so it's a huge shame to see his reporting reach such lows on this IBM matter. If IBM is really about to layoff a huge chunk of its US workforce, IBMers and the rest of us deserve to know about it. Layoffs on the scale posited by Cringely would devastate the US economy in the near-term. But we'll never get close to the truth with people like Cringely making such wild accusations without bothering to do one bit of research about the topic at hand.

Many of you have attacked The Register for not recognizing Cringely's brilliance on this topic. And, perhaps, this story comes from a defensive posture.

The evidence, however, seems to suggest that Cringely writes whatever he feels like without ever bothering to check the basics. Shouldn't PBS strive for higher standards? ®

America is under siege. Do we blame IBM or Cringely?

By Ashlee Vance in Mountain View → More by this author
11 May 2007 21:31
150,000 staff fired. -20,000 left ...


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America is under siege. Do we blame IBM or Cringely?
By Ashlee Vance in Mountain View → More by this author
11 May 2007 21:31
150,000 staff fired. -20,000 left ...


Analysis America faces a very serious question. Is Robert Cringely right?

Last week, Cringely presented the idea that IBM will layoff 150,000 workers, hoping to reduce costs. Cringely's reputation for making the boldest of claims seems to have reduced the impact of his piece. A few technology trade publications mentioned the IBM crisis speculation. The mainstream press ignored Cringely altogether.

If Cringely is correct, then the Wall Street Journal and New York Times had better find some reporters with investigative instincts and start digging into this situation. IBM firing 150,000 US workers would devastate the current, rather optimistic business climate. Worse than that it would leave IBM without a single worker in the US. Perhaps CEO Sam Palmisano has already purchased an estate in Shanghai.

Yes, Cringely overshot with the 150,000 figure by quite a margin. I should have picked up on this but failed to do so. Thankfully, our readers and his bailed out the fourth estate.

At last check, IBM employed close to 130,000 people in the US and well over 350,000 staff worldwide. In a fresh column this week, Cringely, reporting for PBS, addressed these numbers.

"Maybe the number WAS too high," Cringely writes. "Instead of 150,000, maybe the true number is only 100,000 or 75,000 or even 50,000. Would 50,000 layoffs from IBM Global Services be significantly less catastrophic for the workforce than 150,000?

"And while the number of layoffs to come may indeed be less than 150,000, I'd prefer to stick with that larger number, which I feel is not far off. . ."

Cringely's casual approach to these layoff claims strikes me as appalling. I love a controversial, hard-hitting story as much as the next reporter. You cannot, however, mess around with this type of issue and just "prefer" to pick and choose layoff numbers. Reporters, even columnists, need concrete information in these instances. After all, Cringely has targeted nothing less than a technology sector meltdown with his pieces - a meltdown that would reverberate well beyond IBM's boundaries, probably into your home.

Much of Cringely's criticism for IBM centers around a program dubbed "LEAN." The reporter makes it sound like he met with IBMers in a dark alley to obtain this acronym, which portends great change at Big Blue.

As best as I can tell, Lean stands as a common tactic for companies that have embraced the Six Sigma methods for improving process within an organization. You can see for yourself just how common the Lean idea is.

The Lean concept focuses on eliminating waste and redundancy in an organization. If IBM considers the majority of its US workforce waste, we're in real trouble.

In a letter to employees, IBM, of course, argued quite the opposite angle. The company tried to explain a recent 1,300 person layoff and to counter Cringely's original column.


The letter, obtained by Cringely, reads in part:

We said when we released 1Q results we would be putting in place a series of actions to address cost issues in our U.S. strategic outsourcing business. We have undertaken efforts toward that, and recently implemented a focused resource reduction in the U.S. While any such reduction is difficult for those employees affected, these actions are well within the scope of our ongoing workforce rebalancing efforts.

The blog also completely misinterpreted our efforts around Lean. To fully understand Lean, you have to view it in a strategic context - a key part of what we're doing to reinvent service delivery to provide more value to clients and make IBM more competitive. We are using Lean, which is a commonly used methodology to conduct process design and development, to make informed decisions about how to improve and streamline processes. We are going about that in a disciplined and rigorous way, and the intent, as it has always been, is to improve our speed, quality and responsiveness to clients.

IBM faces three major near-term issues - all of which revolve around its services business.

Hard Services.

Big Blue committed whole hog to the services game well before its major hardware rivals HP, Dell, Sun Microsystems, and EMC. That proved a pretty smart strategy with IBM able to gobble up lots of easy cash.

The rivals, lacking competitive muscle, mocked IBM's services play. Sun's then CEO Scott McNealy took the criticism lead, saying things such as "IBM Global Services doesn't want to solve the problem with the car, they want to customize the jalopy. They have to find a way to keep the hundreds of thousands, the hordes dutifully working and completely billable."
As the chart above shows, IBM now faces plenty of services competition from its main rivals. This has made the services market painfully competitive, leaving IBM with tons of services revenue but thin margins. To illustrate this point, I turn to another slide (below) - this time from IBM's own services researcher Paul Maglio.

Maglio spends most of his time these days trying to create more efficient relationships between IBM and its customers on the services front. He argues that the US will be driven by a services economy in the years to come and that vendors along with the government need to invest money into proper services studies.

Such a response from IBM seems only natural given the fresh competitive pressure it faces and the falling services margins. These factors only compound IBM's third problem, which is that its financial results over the past few years are made to look much better than they really are, thanks to a weak dollar.

Is the Services Biz doing its part?

The IBM I'm experiencing does not seem like a company ready to collapse its US workforce. Rather, it seems like a company making gradual cuts to deal with a changing business while at the same time researching ways to pursue services in a more sophisticated fashion. No major vendor can afford the reputation of being a cash cancer on its clients. IBM seems to know this and appears to be trying to fix its past ways.

Cringely argues that IBM's public face is all show. He urges readers to delve into the 1,000+ comments left in response to his first story as proof of IBM's woes.


The problem with most of these comments is that they start by accepting Cringely's premise as true. Such is the nature of message boards.

I also take issue with Cringely's notion that the comments prove all that helpful. You'll find readers leaving poems by Shelley and providing worthless statements such as "Bob, I imagine you emailed a copy of this article to Lou Dobbs" and "Let it(IBM)crash & burn FOREVER!"
True enough, some of the reader comments are fantastic. I enjoyed the same experience with messages left on our original Cringely story and via emails. In fact, a couple of my most respected emailers backed up Cringely's arguments, making me think the columnist is on the right track here.

I'm going to quote one reader, who shall remain anonymous, at length because this is a crucial issue. I have edited the e-mail as I saw fit.

First, this has been kept extremely quiet until now. (I'd heard rumblings about this a year ago, but thought it was more "localized" to specific accounts in the outsource services area - didn't connect the dots.) IBM services is having some problems with accounts that were acquired by IBM as outsource contracts, mainly due to the competency of the acquired team - both management and worker-bees. No surprise here: that was why the customers outsourced the services to IBM in the first place - the customer couldn't manage their own infrastructure. IBM had intended to do some serious load-shedding on these accounts anyway, but the scope is really much larger than I expected.

Which brings us to part two: there is a serious problem with work ethic in the technology sector. This also covers both sides of the management line, with incompetent managers being just as prevalent as incompetent workers. IBM services has had what is probably a similar exposure as other companies to the problems this causes; however, unlike most other companies, IBM is choosing to do something proactive about it.

What do I mean by that last remark? IBM is not just reacting to the incompetence of the acquired worker-bees the way most companies do: IBM appears to be doing one of their every-decade-or-so house-cleanings at all levels. This is going to cut deeply into their middle management ranks, their technical leadership ranks, even into some senior-level positions (although these will probably be couched as "early retirement" or "personal pursuits").

IBM has established a tradition of leadership for over 100 years in all its fields. It has done this by aggressively pruning its workforce time and time again and establishing super-human standards for its workers. In the past this was typified by the IBM philosophy that you live "a Company life" - wearing dark suits and white shirts, taking transfers and relocation regardless of the impact to your personal life, and being forced to work in every area of the company on your way up the management ladder. Failure was NOT an option: you failed at an assignment, you were working elsewhere in two weeks.

Over the past decade, IBM has transitioned from "Big Iron" to the Internet economy with solid success - something that none of its contemporaries (if they even exist) can boast. In the process, IBM expanded aggressively into many "new" technology and services areas - mainly by hiring and buying from the outside. No rocket-science here: that's how everyone does it. IBM is NOW doing what the other companies (SUN, HP, Microsoft, etc.) are NOT doing: it has identified what is working and what is not, and is now purging the failures - especially the human failures, the workers that are not contributing to IBM's growth.

Foreign out-sourcing is not a panacea; however, many foreign workers - especially Chinese and Eastern European - have a very different work ethic than their American or European counterparts. They WILL work harder, study harder, spend more time working and less whining about their company. Their leaders - technical and non-technical - are much more serious about their work and less concerned about becoming dot-com millionaires than their counterparts. So, IBM is choosing to keep a core of motivated workers and replace the rest with new workers without the baggage of a whining Euro-American society. The fact that the new workers are cheaper is a side benefit - IBM has always understood the difference between cost and value - and they will be judged on the value they provide, not simply the cost they save.
If all of you wrote me emails like that, I'd be a genius.

As a Silicon Valley historian and a technology reporter, I have tremendous respect for Cringely. He knows his stuff.

Cringely, however, seems to have confused IBM adjusting its business model to vibrant, competitive threats with some kind of anti-American assault. And, rather than approaching this subject, with the careful touch it deserves, he's relied on fear-mongering and rampant speculation.

It may just be the case that Cringely has a deeper, more insightful agenda at play with his recent pair of flippant stories. Perhaps the American technology worker needs a wakeup call. The rising stock market has us all feeling pretty good again. Sure, China and India have all those engineers, cheap labor and relentlessness work ethics. But we're ideas people and will always be profiting from the cutting edge, while shipping the grunt work overseas.

Well, if the US is truly to rely on its status as a "knowledge economy" and an "information services economy" in the years ahead, we'd better get a lot better at figuring out which services matter and how to accomplish the whole services "engagement" in a way that leaves customers feeling decent about the experience.

IBM to Lay Off Half of Global Services Division

"Cringely says that IBM has begun massive layoffs in a quiet manner, starting with 1300 employees, but by the end of the year, the total will rise to at least 100,000 and probably closer to 150,000 employees, nearly 40% of their U.S. workforce. Some people will be temporarily retained as contractors at a fraction of their salary, and eventually, IBM will also dump many of the unprofitable customer contracts worked on by Global Services or outsource the work to Asia. If these people are looking for work, that could seriously drop wages for technical workers in the US since they will have to compete with these people for available jobs."

IBM (IBM) Announces Job Cuts

IBM hopped on the bandwagon announcing a cut of 1,315 US jobs.

The world's largest technology services company, is cutting 1,315 services-related jobs in the United States, a union trying to organize IBM workers said on Tuesday. "We're putting in place a series of actions to address our U.S. cost base, including a basic focus on resource and cost management disciplines and rebalancing of resources as we execute our global resource strategy," Chief Financial Officer Mark Loughridge said on a conference call with analysts on April 17, according to a transcript of the call.

Loughridge said in April that IBM's first quarter was "noticeably weaker" in the United States, especially in the industrial, financial services and communications industries. The job cuts follow an IBM announcement on Monday that it planned to hire 500 people at a new customer call center in Daleville, Indiana, through 2010.