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Cringely Predicts IBM Will Shed 78% of US Employees By 2015

Posted by timothy on from the should-switch-to-fashion-branding-with-cool-logo dept.

Third Position writes "Cringely with more predictions about IBM: 'The direct impetus for this column is IBM's internal plan to grow earnings-per-share (EPS) to $20 by 2015. The primary method for accomplishing this feat, according to the plan, will be by reducing U.S. employee head count by 78 percent in that time frame.' So far, Cringely's pronouncements about IBM have been approximately true, even if he missed the exact numbers and timeframes. Is he right this time?"

14 of 273 comments (clear)

  1. Brilliant! by Moheeheeko · · Score: 5, Insightful

    We need to make the company more profitable. Lets put out a quality product everyone will need to have.....ehh fuck it thats too hard, get HR on the line.

    1. Re:Brilliant! by Megane · · Score: 5, Insightful

      Do they have to report it as "layoffs" when they sell off entire business units to other companies?

      --
      #naabhaprzrag, #sverubfr-000, #agi-fcbafberq, negvpyr[pynff*=' negvpyr-ary-'] { qvfcynl: abar !vzcbegnag; }
    2. Re:Brilliant! by Anonymous Coward · · Score: 5, Insightful

      Nortel went through that stripping itself off profitable business units that were not making as much money as they want.

      I guess they haven't figured that the management division was the prime under-performing department except at the end when the filed for bankruptcy.

    3. Re:Brilliant! by jmauro · · Score: 5, Informative

      It's called a death spiral. It's something that happens to a lot of companies actually where they start jetsoning their "underperforming" business lines but not realizing that the underperforming business lines are covering some of the fixed costs of the "good" business lines. Once those costs are re-allocated to the "good" lines, they are not underperforming and need to be jetsoned off. Eventually there is nothing left in the organization that can cover the fixed costs and it goes under.

      It's one of the things they teach you to watch out for in business school. Why it keeps happening over and over and over again, I have no idea.

    4. Re:Brilliant! by Svartalf · · Score: 5, Interesting

      Because nobody thinks this stuff through, teaching it at business school or not.

      Everybody tries to appease the "stock market" because it's "increasing shareholder value" (Don't you mean shareseller value, guys? Let's be honest here- since there's no real way to obtain value through dividends, etc. you have to sell it off to some bagholder at some point or short it to them...)

      --
      I am not merely a "consumer" or a "taxpayer". I am a Citizen of the State of Texas
    5. Re:Brilliant! by dubl-u · · Score: 5, Insightful

      Because business school also trains them to minimize costs and maximize quarterly profits. And their managers and stockholders reward them for that as well. Which inevitably leads to that behavior and a bunch of other idiotic ones. Because as you demonstrate with the bit about fixed costs, a lot of these numbers are fictions. Sometimes convenient fictions, but always fictions.

      This is in contrast to the Lean approach where one minimizes waste and maximizes value delivered to the end user. In Lean thinking, staff aren't a cost to be shed ASAP, they're an asset, one you invest in.

  2. Absurd by jbrodkin · · Score: 5, Informative

    The Cringely prediction cited as being "approximately true" (http://www.pbs.org/cringely/pulpit/2007/pulpit_20070504_002027.html) was nothing of the sort. Cringely predicted IBM would imminently lay off 150,000 employees. That was five years. Didn't happen.

  3. please start with the Cognos people by alen · · Score: 5, Informative

    cognos is the worst piece of crap software i've had the pleasure of working with. it's a huge pain in the a$$ to install, you have to make dozens of changes that isn't in the documentation and only available by calling support. even then they tell you to google stuff because the IBM support site is a mess to navigate

    and after you buy the software you find out features are missing because you didn't buy the right version. there are like 20 different versions of Cognos with different features

    SQL Server may not be 100% as good, but at least it's pretty easy to set it up and get going for the 90% of the features you will use

    1. Re:please start with the Cognos people by timestride · · Score: 5, Informative

      Amen-- Cognos is a mess. The thing I hate the most is that their support staff only know certain aspects of the suite. If you have an issue with Cognos Planning, but you are accidently routed to someone in the Cognos Business Intelligence support group, they have to reroute your case and you'll be waiting at least several hours before they call you back. Heaven forbid you have an issue with integration between the two suites.

  4. Probably Wrong by elbonia · · Score: 5, Insightful
    Considering the fact that most of his big predictions are completely wrong why believe he's right? When did Apple buy out Time Warner Cable? How about Facebook forking and going against LinkedIn. Or Apple’s white iPhone 4 would be the Verizon iPhone 4?

    What kind of predictions does he get right? Software will crash and Google will be the new Microsoft and Microsoft will be the new IBM.

    http://www.cringely.com/tag/2011-predictions/

  5. This joke has been done before by rudy_wayne · · Score: 5, Funny

    Several years ago somebody put out a joke press release that went something like:

    Dear Employees,

    We have calculated that reducing the workforce by 10% would result in a savings of $100 Million. Taking those calculations further, we have determined that eliminating 100% of the workforce would result in a savings of $1 Billion. Because we are committed to driving maximum shareholder value, we are announcing that we will be eliminating 110% of the workforce. The additional cuts will be achieved by laying off employees of other companies.

    When questioned if laying off 100% of the workforce would cause the company to no longer exist, the CEO replied "Nobody has ever tried this before, so let's not be too hasty to jump to conclusions".

  6. Re:Absurd - indeed! They cannot fire managers.. by scsirob · · Score: 5, Funny

    Impossible. That would mean they would have to get rid of some *managers* too! Sorry, that ain't gonna happen. People with actual knowledge, sure. R&D, perhaps. But firing MANAGERS?? No way! Someone has to fill all the procedures and spreadsheet targets, ya know..

    --
    To Terminate, or not to Terminate, that's the question - SCSIROB
  7. Re:What decline? by magarity · · Score: 5, Informative

    The article is about slashing 78% of US employees at IBM. That's not a sign of a healthy company.

    They'll be replaced immediately by employees from India and China.

    When I was in China I applied to IBM for data warehouse consulting and got to a third round interview. The hiring manager told me the salary, which was about $1,000USD/month (a pretty good rate in China) but they would send me to the US to work. I pointed out that was below the US minimum wage and she said never mind that because they would send me on a 'Z' visa which is good for up to two years with no salary restrictions. When I then objected I couldn't be sent to the US on any kind of visa as a US citizen, she immediately hung up. I tried to call and email to follow up but couldn't get any response.

    So, don't worry about IBM's profitability after they get rid of those pesky US workers and their outrageous salary demands. The going rate on an IBM data warehouse consulting is measured by $hundreds/hour and it's almost all markup straight to the company.

    Write to your congresscritter and demand something be done about Z visas.

  8. IBM is getting out of software development. by FriendlyPrimate · · Score: 5, Interesting

    I'll let everyone in on a little secret. IBM is getting rid of most of its software developers because it wants to get out of the software development business. The reason is because they, for a variety of reasons, produce mediocre software, and the executives know it.

    IBM's strength is its sales channels. It can command high prices for it's software because it is a trusted brand, and it's very good at strong-arming customers into purchasing expensive complicated solutions once they get their foot in the door.

    IBM's new software business model is as follows....
    1) Find holes in their "portfolio" for providing end-to-end solutions for customers.
    2) Purchase existing companies where that software is already implemented (e.g. Rational, ILOG, Green Hat, Cognos, Buildforge, Telelogic, etc...)
    3) Sell said software at much higher prices than the original company could have ever gotten away with.
    4) Reduce headcount by eliminating developers from purchased company, replacing them with offshore developers whose only purpose is to "maintain" the newly acquired software. Also, eliminate less-profitable niche products and lay off those developers except for the cream of the crop.
    5) Reap huge profits.
    6) Repeat.

    Check out the list of companies they've acquired...
    http://en.wikipedia.org/wiki/List_of_mergers_and_acquisitions_by_IBM#Acquisitions_since_1999

    So don't think that the executives at IBM are idiots. They're not. They've found a way to squeeze tons of profits from existing software companies. They have no reason to care about employee morale. They don't need developers. They've got too many as it is from all of these acquired companies. Bad morale means employees will leave on their own, meaning they don't have to pay severance.

    Also, IBM typically purchases companies for a handful of their product line. That leaves lots of smaller software products that IBM simply has no use for (not a large enough market, duplication of product lines, etc...). Often, "rebalancing" means chopping these products out of existence. IBM has literally THOUSANDS of these small niche products that it wants to eliminate.

    So for developers, it sucks, because the IBM executives have no need for you anymore. There's no reason for IBM to produce its own software anymore. Why risk starting development on a complex product when you can just purchase the finished product? You're nothing more than a "resource" that they have too much of and which needs to be reduced through "resource actions".

    But for executives and shareholders, it's a wonderful arrangement. Don't be fooled....IBM can be profitable doing this for a very long time. Please keep in mind that IBM reducing US headcount from 130k to 90k is misleading. That number does not include the huge number of employees that they've absorbed through acquisitions. They've laid off many more than 40k US employees, and they have no reason to stop now.