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IBM to Lay Off Half of Global Services Division
Rolgar writes "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."
I'll wait until I hear it from a journalist. No, you're not.
"I'd rather be a lightning rod than a seismometer." -Ken Kesey
heavily indebted McMansion owners?
I worked for IBM as a contractor and I'm sure for anyone else who has worked there whether as a full time employee or as a contractor, I am not kidding when I say they are highly mismanaged. I worked as a security engineer responsible for managed firewall services they were doing and I was extremely frustrated at the methods upper management handled things. We'd often spend an hour to two hours over the phone talking about nonsense and waiting for others to join in on the calls. Mind you I worked from home so IBM wasn't spending on me what they did for their normal employees. Whenever I had to head to Southington CT, I would see nothing but waste. I won't be crying for any one of those workers, that's the name of the game, making money. I only wonder why it took so long since this was inevitable anyway.
Infiltrated dot Net
Let's just hope IBM layoffs are a blip on the map and not a sign of things to come.
Then again, any IT person not in a critical role should always be planning (financially, professionally, and personally) for layoffs or reduced compensation. IT is not, and never will be, a constant line of supply/demand. If you want job predictability, be a farmer.
It's also interesting they are dropping unprofitable contracts. Imagine if someone like Dell did that. More than 5 calls over the same user issue? "Sorry, sir, please repackage your computer and return it to Dell for a prorated refund. We are no longer interested in maintaining this support relationship or maintaining you as a customer."
IBM is basically off-shoring their staff, and keeping their managers and execs. The problem is that is where all the waste is at.
OTH, the Indian companies are hiring American, but at lower pay. They treat the employees like cattle (presumably like they do in India) and have little to no benefits. But at least the management does not suck. The companies are able to make profits. IOW, it may be time to outsource the American managers who are terrible at doing their jobs.
I prefer the "u" in honour as it seems to be missing these days.
Being an IBMer I was quite alarmed by this headline. But if you read the linked story, you'll see that Cringely is quoting his "many friends" at IBM.
That's not what news people would term a reliable source.
It's not to say that this might not be true but I'd like to hear it from something a little more reliable than Cringely's watercooler.
9.8/10 is also a fraction. And please stop the alarmist protectionist crap.
Author of `Professional Plone Development`, available from Packt Publishing.
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if these people get laid off, won't that mean they can fill some of those supposed jobs that Microsoft et al keep saying they can't fill because there aren't enough qualified workers in the U.S.?
Won't that in turn mean that Microsoft et al won't need as many H-1B visas since some of the positions will be filled?
If Microsoft et al don't attempt to fill their supposed empty positions with some of these people, does that mean they are lying when they say they have all these open positions and no one to fill them and must look overseas for qualified people?
We will bankrupt ourselves in the vain search for absolute security. -- Dwight D. Eisenhower
...SCO will hire y'all with the cash they win from your former employer.
Anybody want a peanut?
These are mainly services people, performing services for somebody. These somebodies are still going to need services even if it is not with IBM anymore. It is not like they are closing down a manufacturing plant; they are dumping customers, but these customers will just find someone else to do the work. Whoever picks up these contracts will probably need more employees. There will probably be net increase in unemployed people, but a portion much smaller than 100,000.
Global stuff. You know. Like... increasing productivity through outside-the-box thinking and a fundamental paradigm shift.
Really, this is not surprising at all -- what is surprising is how many US companies are not doing the same thing. If the US were slated to remain the largest market for tech services, then it would make sense to make sure the workforce was largely American.
Now, I'm sure to be modded into oblivion, but I think it's important for tech workers especially to understand that they are likely replacable at a fraction of their cost -- and the more experience under their belt, the more this holds true.
Another thing not mentioned by Cringely is that IBM is also diversifying its employment base. Given the ticking time-bomb that is the US over-leveraged economy, this makes good sense for the long-term security of a company. I'd be shocked if other big international companies aren't thinking along the same lines.
Now, as for Cringely's opinion that this move is just to boost stock price, thereby enriching the current executive group, I think that's only part of the equation. It's easy to blame management greed for decisions that are unpopular amongst the rank-and-file. It's not so easy to understand that the stock market rewards moves like this precisely because they ARE good for the company. Sometimes it's a case of management simply making the best of a very sticky situation, when pain is unavoidable.
All that said, neither I nor Cringely know the full details, and so I'd take what either one of us has to say with a rather large grain of salt (and since I'm an unkown, two rather large grains of salt for me).
"Trolls they were, but filled with the evil will of their master: a fell race..." -- J.R.R. Tolkien on Olog-hai
So what (in a nutshell) is IBM Global Services? What do they do?
It's IBM's consulting division.
In a nutshell, it's all of IBM except the parts with which you're probably familiar from the Good Old Days; it's all the business consulting, management consulting, logistics, etc.
What it's not is the remaining parts of IBM hardware; the AS/400 division, the mainframe division, software division (Lotus) etc.
I think Cringlely is dead wrong on all this -- in the past few years it's been Global Services and software that are really hauling everything else along. I think Hardware would probably survive on its own, as long as they could keep the IBM marque, but the money is in the service crap.
"Ladies and gentlemen, my killbot features Lotus Notes and a machine gun. It is the finest available."
They do IT consulting, and make up one of the "Big Four", along with Accenture, BearingPoint (formerly KPMG Consulting) and Deloitte Consulting.
IBM Global Services is essentially the artist formerly known as PwC Consulting (which IBM purchased). PwC Consulting was formerly the consulting arm of PriceWaterhouse Coopers, and was spun off in 2002 in response to the Enron/WorldCom/Arthur Andersen messes & the introduction of the Sarbanes-Oxley Act (requiring auditor independence, separation of audit & consulting, yadda yadda).
Before IBM bought PwC Consulting, you may recall that it was on the verge of being renamed Monday.
Just once I'd like someone to call me 'Sir' without adding 'You're making a scene.'
That's the publicly announced ~1500 or so, it does not confirm a 40% US workforce layoff. 40% would be a ludicrously desperate move for a company that at worst is described as stagnant, not exactly in trouble. When you aren't announcing any losses, just less-than-awesome gains, it doesn't make sense to just cut out that much in as short a period as a year. IBM is topheavy and I definitely agree that the management is the bulk of the problem (not only *way* too many of them, but they are also more highly paid than the technical people who do real work), and so I wouldn't be surprised if a couple thousand more get screwed over the year, but 40% would be the dumbest thing and I think even shareholders would see it as a detrimental, stupid move.
One problem they do seem to have is startup envy. They see a company come out of nowhere and achieve great fame and a sizable market cap, and wonder why they can't achieve the same percentage growth. The obvious answer (that IBM's market cap is overwhelmingly huge already, nowhere to really go) doesn't seem to occur to them.
XML is like violence. If it doesn't solve the problem, use more.
America has given many companies the fertile soil needed to create hugely successful businesses. Now these same companies have decided to take a big, stinky shit on that very same America, by offshoring everyone so that a tiny minority of people can go from super-ultra-rich to super-ultra-deluxe-rich.
If you don't see the problem with that, you're a moron.
Moving forward, they leverage their intellectual capital in conjunction with the synergistic core competencies of a highly mobile workforce of motivated resources to manage global diversification, decentralize initiatives, and reduce inventory turnover in an increasingly risk averse marketplace. They operate on the principles of a paradigm shift away from participative management towards actionable strategic alliances. Quite intuitive, really...
http://www.bynarystudio.com
Now you fire all those guys and hire a bunch of guys from Brazil at 1/4 the original team's salary. Even if the original team hangs around to train the new guys the new guys have to ramp up from scratch. Even if they're excellent programmers it's going to take them 6 months to a year to even get comfortable with the code, even with documentation in place. During that time the overall application design will get slightly worse as they try to implement new features in ways that don't fit in with the original application design.
In the mean time you've got 150 other tech companies realizing that people in Brazil will work for peanuts and they'll all move in to the country. Now your programmers are realizing that they can get more peanuts if they do the same sort of job hopping that we did in the 90s to get more peanuts. So over the course of the next year your team is replaced by new people who you have to pay a lot more money to and who are completely unfamiliar with your code base again. So now you're paying your Brazilians as much as you were paying your original programming team and they have no experience with your code base. Good job!
You can only save money that way if you buy into the fallacy that people are pluggable resources and experience counts for nothing. If you believe that then you can get as much done with a summer intern as you can with someone with 20 years of programming experience. Give it a shot sometime. And you can find a company that doesn't have that philosophy. I wouldn't want to work for a company that thinks I'm just a body taking up space anyway.
I'm trying to teach myself to set people on fire with my mind... Is it hot in here?
Let me first say I work in IBM outsourcing; SO actually. I work with this stuff. Let me also say that whenever wherever we can send a unit of work outside of the US we do that. But, one presumes there are those people 'over there' to do that. One can eliminate 150,000 jobs from IBM but at least some fraction of that, probably a large fraction of it, would have to be employed over in those other places to do that work, one estimates at a fraction of the US cost. And we are not seeing that level of growth over there. Maybe I'm too far removed from it or maybe I'm whistling past the graveyard but I'm not seeing that level of growth overseas.
150,000 would more-or-less be IBM's entire U.S. workforce, not 40% of it. If Cringely can't even get that right, I'd treat the rest of the article as extremely suspect.
SirWired
It sounds like they're just dumping their Unprofitable parts of Services. If that's the case, they might be able to clean up. The Old Contracts and such are still likely to send money to IBM Software, and many of the people who are getting laid off, if they continue to do things in the industry, may continue to do things the way they learned, the IBM way, and keep sending money there as well. (You get to say "I can work with WebSphere!" It's a selling point for yourself that you're not going to just throw away. So your next client runs on WebSphere.)
The World Wide Web is dying. Soon, we shall have only the Internet.
IBM has succeeded in pimping and prostituting the IT services fields, to the point now that they are soon to be going the way of the TV and Stereo repair shops. They could no longer get people to come in and work for damned near free and give all the money to the conglomerate IBM, so they will take it on the road overseas and use and abuse the various Europeans.
I saw the light early on with them and got out. I hope most of my friends still employed there are also seeing the light and finding the door before its too late.
Of course from what I know and what I am hearing, IBM didn't do that nifty of a job with their clients either. They bring in contractors and temps to do the services contracts and with such a high turnover of temps and contractors, how on earth can you seriously to expect that you'd ever meet SLA, much less keep your customer??!!!!
How can you expect IBM who only *hires* managers and team leads, and then brings on "temps" and contractors to do the actual work and *dirtywork* on the client site, to actually succeed?? The one customer I was at was sorely pissed at IBM many times over for many things. Some justified, some not. Almost all the justified reasons were because the only people to provide the legitimate valued service to the client were done by people who were good, skilled, and knowledgeable;... and quickly left the temp gig with IBM and their clients for a real full-time permanent day job elsewhere with benefits and all that comes with it. That usually left the the client rather lacking and pissed. I watched it many times and finally a door opened for me and I left. This is only going to get worse people.
Wake up and smell the economic sh** they are shoveling your way.
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Monday
Yup. They spent some huge sum of money to an advertising/PR firm, in order to come up with a name for this new, hot (well, they wanted it to be hot), consulting company. That's what they came up with. "Monday." Like, everybody's least-favorite day. The day you wish was always some other day.
And that's how they got called "IBM Global Services," which doesn't exactly roll off the tongue, but then again, nobody ever says, "sounds like a case of the IBM Global Services."
(Well, actually they might, but that's a different topic.)
"Ladies and gentlemen, my killbot features Lotus Notes and a machine gun. It is the finest available."
There are only 150k total IBM employees in the US. Cringely is talking out of his ass with that number.
I see you're a contractor systems administrator. I'm sorry you won't be able to come on as a full-timer, but your post seems to be a serious case of sour grapes. I mean...part of being a contractor is that your job is not guaranteed.
Blar.
Let's be honest here. I work in Global Services in South America. A lot of the accounts were way overstaffed and the people there were not exactly the best and brightest yet still getting 80K+ a year. I'm not a senior sysadmin by any stretch of imagination, but it can be seen from all 5000 miles away that my American counterparts are in no way superior to many of the seniors that I work with who have 10+ years of experience managing servers in environments where there's less money and you have to be more inventive to solve problems, and who've had to face even more difficult economic situations
Many accounts are overspecialized and action is held back by massive bureaucracy. Despite everything, my pet theory is that IBM simply can't support its massive managerial structure divided by a million differente criteria -accounts, competencies, etc.- , eventually it had to give way.
You can only save money that way if you buy into the fallacy that people are pluggable resources and experience counts for nothing. If you believe that then you can get as much done with a summer intern as you can with someone with 20 years of programming experience. Give it a shot sometime.
But the CxO's of the big American corporations aren't stupid. They know *exactly* just what a house of cards they're building... It's that they just don't care anymore. All they have to do is prop up their company's stock price long enough to fool the shareholders for a short while long enough for their golden parachutes to fill up because they know their days are numbered quite short, and first and foremost on their minds is how to pillage the most from the company for themselves before they're done with it. They are not afraid of Sarbanes-Oxley any more either. Scandals like Enron, Worldcom, Tyco, Arthur Anderson, Global Crossing, and a dozen others in the past half decade have taught the sharks mostly only how not to get caught or how to not get punished if they do get caught.
Meanwhile, the Developed Country's worker(s) should be not resting on their laurels but working to improve their value so that they cannot be replaced easily by outsourcing
Talking about Economics, where did the idea of infinitely improvable value come from? In a global (job/skills) market where a man from the USA and a man from India are equally skilled, anything the USian does to "improve his value" the Indian can and will do too - maybe becoming more valuable than the USian.
Jobs aren't being offshored to India and China because Indians and Chinese are more valuable, but simply because they cost less to employ. That situation will continue until the (inevitable) cycle of upward inflationary pressure in their economies (and maybe deflationary pressures in the US and Europe) increases the Indian/Chinese cost of living until those workers cost the same to employ as USians and Europeans.
Then the work will move on. We've seen it all before. One day, they'll be offshoring work to Africa, you wait.
or train them wrong.
I spent rwo weeks training my replacment how to write USB firmware...it's a shame we didn't do that.
The Kruger Dunning explains most post on
But there is a 60% probability that in his article Dvorak will recommend that Apple be bought or do the buying.
Unless he has already written that article this month. In which case, the probability drops to 40%.
Rich And Stupid is not so bad as Working For Rich And Stupid.
If you think most managers don't deserve the salaries and bonuses they get, fine, I agree with you wholeheartedly. But the article says "The point of this has nothing to do with the work itself and everything to do with the price of IBM shares".
One usually thinks of shareholders as a mixture of Bill Gates, Darl McBride, and Steve Ballmer. Well, think again. I'm a shareholder of many companies and you are one too, if you have a pension fund, life insurance, or almost any form of investment. The point is that when you go to the bank and talk to your manager, your main preoccupation is how much you will get from your investment.
If you worry first about the social impact of the companies that make your pension fund and second about the financial results, well, kudos to you, but most people aren't like that. Maximizing a company's profits doesn't mean just making someone "super-ultra-deluxe-rich", it also means providing a decent retirement to people who have worked their whole lives to get it.
IBM Global Services isn't just essentially PwC. Before they bought PwC there was IBM Global Services which was formerly ISM (Information Systems Management?). Back then it was mostly IT outsourcing. With the purchase of PwC it grew to be business consulting too.
If IBM, a publicly traded-company, is planning on laying off 1/2 of it's Global Services division, you can bet your bottom dollar that that's considered a material event and they have to publicly disclose it.
"I'd rather be a lightning rod than a seismometer." -Ken Kesey
Agreed. But Instead, they have $100k lunches: fiddling while Armonk burns
(scroll down, or search for IBM)
I guess they could be buying it with their own money, but still, that's just bad PR in the middle of layoffs. a$$holes.
I've often thought how nice it would be if there were laws passed saying that to be registered as a company in the U.S., you have to have X% of your workforce in the country. Or that executives had to be based in the same country as the majority of their workforce. See how interested companies are in outsourcing when it means they have to move to India.
It's not outsourcing, it's incompetence. My opinion: If you read the links carefully, you will get the impression that IBM is an incompetent company run by someone with no technical knowledge. Death is normal for an incompetent corporation.
Links: General information: IBM Employee.com.
Cringley: "... the executive ranks from CEO Sam Palmisano on down were losing touch with reality, bidding contracts too low to make a profit then mismanaging them in an attempt to make a profit anyway..."
IBM employee: "They just cut nearly half our team Tuesday, wtihout even notifying the customer (Who is going apeshit). And 40% is indeed the workforce reduction I've heard bandied about." That comment is anonymous, of course. However, that fits with my experience, which is that IBM is an amazingly incompetent company. The incompetence has been there for a LONG time. Remember, IBM lost more than $2 Billion on OS/2, which in the beginning was fundamentally better than the competition from Microsoft.
IBM is run by a technically ignorant CEO: Samuel J. Palmisano is a technically ignorant CEO: "He holds a Bachelor's degree in history..." Note that his official IBM biography carefully avoids mentioning anything that would give a true picture of his incompetence.
I don't think the IBM layoffs are about outsourcing. They seem to be only about incompetence. Only technically ignorant managers contract with IBM, a company run by someone as ignorant as they are.
Also, I don't think outsourcing is working. U.S. companies get an EXTREMELY bad reputation when calls are answered by an under-trained person who can't speak English. Outsourcing is more an abuse of people outside the U.S. by U.S. managers than it is a way to get things done, apparently. Outsourcing call centers is a very effective way to sell customers on the competition, if the competition has competent employees.
Look at the web sites of any online bank. They are stupid, stupid, and purposely stupid. After people in India learn how to write good banking software, magically some company owned by an Indian will have the best banking software.
There is only one reason for outsourcing. Non-technical managers want the technical responsibility as far away from themselves as possible. It is dishonesty only.
Walk down any street in India and ask yourself: Why are people in India so poor? They are poor because their culture is extremely self-defeating. No matter how well an Indian who is first- or second-generation educated is trained technically, he is still guided mostly by his culture.
The claimed cost savings are not there. They simply are not there. The "cost savings" come from situations like this:
1) It is cheaper to hire Indians for a sloppy, poorly defined project than it is to hire people in the U.S. for a sloppy, poorly defined project, and the result is the same.
2) Many top managers today are like kings. They have complete control, can be as destructive as they want to their company and to other people, and are very ignorant. So when it comes time for a technical improvement that will be a lot of work, and require a lot of responsibility and decision-making, moving the entire project 10,000 miles away seems attractive. The distance offers lots of excuses, and it just doesn't matter to the king how much money is wasted. The "cost savings" are what the king says they are.
We are going through a time in which most managers of technically-oriented companies know nothing about technical issues, and don't want to know anything.
Does anyone at these corporations ever consider that by putting Americans out of work they're shrinking the size of their market? A little temporary boost in profits will be followed by a long term loss...
No, they aren't considering it. This behavior is straight outta a Marxist critique of market economics, where company A works to minimize their own labor costs, and counts on every other company to pay out enough to finance a market for A's goods... except that just about every firm is company A.
A classical Adam Smith economist will respond that the capital freed by (for arguments sake) IBM ditching thousands of employees can be more profitably deployed elsewhere by the Company and stockholders. Ex-employees, too.
A fly in that ointment is that nowadays, most of that capital is being redeployed out of the US, and it takes a while for the domestic economy to take up the slack with increased added value to crank the domestic incomes back up. Most US-based multinationals (if the Economist, Forbes, the WSJ, Biz Week, and my various stockholders reports are any indication) see their future growth in sales and headcount overseas. According to his latest financial disclosure statement, so does Dick Cheney. So, exactly how or when that increased domestic value is going to be created is an open question.
For the moment, the effect of the tide of money leaving the US is hidden by the Chinese and Japanese buying Treasury Notes to hold down the value of the yuan and yen. When that tails off, interesting things will occur. It's unlikely to be a meltdown, but it won't be pretty.
Luke, help me take this mask off
Walk down any street in India and ask yourself: Why are people in India so poor? They are poor because their culture is extremely self-defeating.
Tell that to all of the farmers in India committing suicide because they can't compeat with all of the heavily subsidized produce from the US and EU. The same thing happens in South Korea and Mexico. People wonder why so many Mexicans come to the US as "illegal aliens". The reason why is US subsidized agriculture products and NAFTA. Because of the subsidies US agribusinesses can export to Mexico and sale it for less than Mexican farmers can grow the food for. This drives Mexican farmers off their farms and they go north to try to cross the border or they go into Mexican cities and those already in the cities are driven north.
Remember, Time-Warner bought AOL and immediately lost 88 Billion dollars.
WRONG!!! AOL bought Time Warner!
FalconShould there be a Law?
Seriously, whenever I hear about massive layoffs, the same question pops into my mind:
Why are the employees being punished when this is so obviously a management issue?
If the managers were doing their job correctly, then one of two things would of happened:
1) Either the projects would generate enough revenue to keep the current workforce, or
2) the workforce wouldn't of got "so large" that they need to cull it.
Call it cost saving if you will, but if I were working for IBM and got to keep my job, I wouldn't be turning up Monday. Or any other day for that. If these stories turn out to be true, I'll never buy something from IBM again. If IBM isn't being managed properly, get new managers, not cheaper staff.
I always thought IBM had built its empire on quality and innovation rather then being the cheapest.