This week I'll try to tie up some loose ends left from last week's column, deal with some of the issues raised by those thousand comments, and even give the last word to IBM, itself.
The greatest single criticism I received this past week was with the number of possible layoffs I threw out, which was 150,000 -- a number that dozens and dozens of readers pointed out was greater than the total U.S. workforce for IBM. Maybe the number WAS too high. 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 for reasons I will now explain.
IBM's mysterious LEAN program, which the company says I mischaracterize but then won't explain specifically what I got wrong, is global. LEAN involves the restructuring of IBM's global workforce to achieve certain unstated goals, most likely centered on profitability, with the goal of regaining that 37 percent decrease in market cap IBM has suffered since 1999. This restructuring means firing employees in some places and hiring them in others. [...]
IBM is a true multinational company, and any program like LEAN will be applied globally. It has to be since the very essence of LEAN is foreign hiring. So that 150,000 number is a global number. At risk is every non-sales position in IBM Global Services not just in the U.S. but in any country with a cost structure more expensive than the United States, which would include most of Europe and even parts of Asia. At the same time IBM sees attrition in the U.S. and growth in China and India, there may well be significant job losses in the European Union and Japan. [...]
Here is what's really happening. IBM's outsourcing business has been declining for the last several years. Through a succession of cost reductions they've been able to partially compensate for the lost profit. But this costing cutting has had a negative effect in that it has accelerated the loss of business. A few years ago IBM started its "On Demand" service offering, but On Demand has not been as successful as hoped. It certainly has not replaced the lost services business. So IBM needs a Plan B and that Plan B is called LEAN. [...]
IBM management is impatient and wants to improve its financial results quickly. They have studied the company's situation and probably have come up with numeric goals for downsizing and restructuring the company. They are using LEAN as a means to get to these goals faster.
IBM will of course respect the laws and labor agreements where it operates. However, IBM is now looking closely at the profitability of its business operations -- ALL of its business operations. If an existing business is sufficiently efficient and profitable, little will be done. However, if IBM operations are not as profitable as IBM hopes, then changes will be sought. The offshoring of some jobs is one way IBM cuts costs and improves profitability. If IBM chooses this path it will work with the leaders in the companies it serves as well as with local government. IBM will make a very strong and compelling argument to change how things are done.
Alas, offshoring doesn't work well in practice and certainly doesn't work better than keeping the work here in the U.S. -- a fact that IBM and a lot of other companies consistently fail to see. [...]
IBM will also argue there is a worldwide shortage of skilled IT workers and those laid off should be able to find work. What IBM fails to mention is there is high demand for ULTRA-CHEAP IT workers. Well-compensated IT workers will have a hard time finding replacement jobs with comparable pay and benefits.
Now to the 1,000+ comments from last week, I suggest you read them -- all of them. They are among this week's links. If you care about IBM or care about what is happening in corporate America, these thousand comments write a book about what's happening from the inside. If anyone thinks I am making up this story, read the comments and you'll know that my aim here is true.
The comments tell this story far more eloquently than I ever could. [...]
Finally, here is IBM's internal response to last week's column: ...
Of the roughly $5 increase in earnings per share that IBM says is possible by 2010, 75 cents comes from the assumption that IBM's recent growth rates will continue. IBM sees another $1 coming from wide-ranging efforts already underway to cut costs and boost profit margins; $1.10 from more than $40 billion worth of stock buybacks; $1.20 from acquisitions and other future growth initiatives; and 90 cents from retirement-related savings. IBM is freezing accruals in its pension plan after this year.
But, the real road to better EPS for IBM is the CFO route. And, that is too bad, because it means that the company does not think much of its current businesses. No, the key to the improvement will be cost cuts, share buy-backs,chopping retirement benefits, and making acquisitions.
Perhaps IBM should not be judged too harshly. It has underperfomed the markets for the last five years. It needs to come up with something to make Wall St. happy. But, it has no plans for an HP-stype resurrection. It wants to go the financial engineering route.
Given what IBM stood for over many decades, this is really too bad. IBM was at the heart of US technology innovation. It filed for more patents than Thomas Edison did, year in and year out.
But, IBM's plans reveal a sort of self-loathing. The things the company cannot do with better products and services, it will do by pushing out people, cutting their benefits, and buying in shares. It is the poor man's way to build an attractive investment.
An outside vendor was transporting the tapes from one IBM facility to another on Feb. 23 when the tapes fell out of a contractor's vehicle in Westchester County, N.Y., not far from IBM headquarters in Armonk. IBM representatives went to the scene and couldn't find the tapes, spokesman Fred McNeese said Tuesday. [...]
McNeese said there is no indication the information on the tapes has been exploited. But as a protection, IBM has offered a year of a credit-monitoring service to the affected employees, McNeese said. As for the customer information, McNeese said it included records of business transactions between IBM and certain clients, but he called the data "inconsequential."
Like other competing proposals in Congress right now, the "Skilled Worker Immigration and Fairness Act," introduced on Tuesday by Sens. Joseph Lieberman (I-Conn.) and Chuck Hagel (R-Neb.), also proposes raising the existing annual cap on the controversial H-1B visas from 65,000 to 115,000 for fiscal year 2007. That number could climb by 20 percent in each subsequent year, to as high as 180,000, if the previous year's quota was exhausted
Consider the current status quo:
If the current growth dynamics hold, there could be big spin-off benefits for the major outsourcing firms that can deliver quality engineering and design work, as well as other services, to big airline manufacturers. That's the hope anyway as Airbus, Boeing, and engine makers such as General Electric (GE) and Rolls Royce step up research and development work and sales in India
Critics say outsourcing firms, including Infosys Technologies and Wipro are using the visas to replace U.S. employees with foreign workers, often cycling overseas staff through U.S. training programs before sending them back into jobs at home. The lawmakers are intent on probing whether those allegations are accurate. "Supporters claim the goal of the H-1B program is to help the American economy by allowing U.S. companies to hire needed foreign workers," Durbin said in a statement. "The reality is that too many H-1B visas are being used to facilitate the outsourcing of American jobs to other countries."
In outlining the investigation, Durbin and Grassley are making details of the visa program public for the first time, including the number of visas awarded to non-U.S. companies. The nine firms, led by Infosys and Wipro, use 19,512 of the H-1B visas, or 30% of the 65,000 visas allowed each year. This indicates that Indian outsourcing companies participate more actively than previously thought, garnering for themselves visas that could otherwise go to U.S. firms. "This is information that we never had before," says Ron Hira, a public policy professor at the Rochester Institute of Technology who has studied the issue closely.
“It was a vote whose time had come at Verizon,” said Brian Foley, an expert on executive pay in White Plains. “People were frustrated with the way management had been paid relative to performance and even though performance in the last year had been better, it was coming off a low.”
Ms. Krueger's reply (excerpt): If you are talking about the Cooper settlement portion of your pension, the two options are relatively equal. The monthly annuity is taxable income. The cash settlement is also taxable income unless you have the check made out to an IRA account -- and the taxes may include an early withdrawal penalty, depending on your age.
If you are talking about your base pension, unless you are close to age 65, the immediate annuity includes a substantial early retirement subsidy that is NOT included in the lump sum option -- make sure you do a financial analysis and look at the relative value of the various options, because they are not equivalent. Each option has tax consequences, which will vary based on your individual situation, so make sure you understand that as well. Also, IBM uses the lowest possible interest rate to calculate the lump sum amount, so as to pay you as little as possible.
If you have a spouse, and you take the annuity, you need to decide whether to take the option for continuing all or part of the annuity for your spouse if you die first. This is actually a form of life insurance. When I did the financial analysis, I discovered I could purchase a separate life insurance policy to get an income stream for my husband much more cheaply.
The movie, screened for TIME, is double-barreled Moore, a mix of familiar numbers (47 million uninsured Americans, the ever rising cost of care) and chilling moments (the 18-month-old baby who dies of a seizure when she’s denied emergency-room access, the husband and father with kidney cancer whose insurer won’t pay for a bone-marrow transplant). Together, they will have many moviegoers angry enough to gouge holes in their armrests.
Stories like Devante Johnson’s are not unusual. Three months ago a homeless seventh grader in Prince George’s County, Maryland, died because his mother could not find a dentist who would do an $80 tooth extraction. Deamonte Driver, 12, eventually was given medicine at a hospital emergency room for headaches, sinusitis and a dental abscess.
The child was sent home, but his distress only grew. It turned out that bacteria from the abscessed tooth had spread to his brain. A pair of operations and eight subsequent weeks of treatment, which cost more than a quarter of a million dollars, could not save him. He died on Feb. 25.
I'll tell you this, if the exceptions don't go through the remaining folks in my dept truly have my sympathy because coverage will be a nightmare and it will be hell for these people. I know big business is all about the bottom line and saving money but this is ridiculous because the people who are left will have a heck of a time trying to take vacations, PC days, as well as gwtting up to go to the restrooms. I have to think that at some point IBM is bound to fail because of this type of greed and arrogance. The KARMA police will getcha if you don't watch out!!! -Laid........ off-
We can appear to be hardworking, dedicated IBMers while constantly undermining and sabotaging the efforts of IBM to sign new business, keep existing business, or make contracts profitable. We are not helpless. We can choose to fight back. The cathartic effect of payback is highly underrated. FIGHT BACK! -Anonymous-
NO ONE is safe from what will be happening for the next two years. PLEASE PLEASE PLEASE remember to be a boyscout. I wish that I would have been more of one. Be prepared for the ice cold call from your manager telling you that you have been "selected" to be laid off (its a fired) from IBM.. bust your ass and get screwed in the end anyways.. Read the book called "The World is flat" its a great roadmap to what is going on now. The continued export of high paying jobs will NOT .. I repeat NOT stop.
Protect your family by researching career changes and other viable income paths now.. no one is safe. I wish I did more before I got whacked. Do yourself a favor.. think about how the quality of being an IBM'er has suffered in the past years. The work load has increased and the customer has become more enraged. You will now be stuck with an ever increasing work load.. 50 hour weeks will be a dream DO NOT BE AN IDIOT when management tells you that the worse is over..
IBM management cannot be trusted anymore.. dont be an idiot. USE every resource on the global campus to your favor.. download all the classes you can. You can also order 4 cd's per year.. get the tools to increase your worth OUTSIDE of IBM.. Dont be the fool I was giving everything you can to be an IBM'er.. its dead and will not be back. Take that energy and apply it to bettering your self worth and skillset.. start preparing for a life outside IBM Research the recent proxy votes for being able to sell company assets.. Look at the other votes.. something is happening. Dont be a fool and think the next company that buys whats left of this division (If thats what is happening) to be any better.. The world of IT is flat.. and the Americans are screwed -More cuts end of may-
Alliance reply: Yes we are getting more members and our web site visits are close to 60,000 for the first 2 weeks of May. We are glad the word is getting out. The next step is to ramp up the organizing. Keep watching the web site for details.
I wish I could have said this while handing out union flyers, but nonetheless... WAKE THE **** UP, PEOPLE!!! -Steve D.-
The RAs are coming. The door figuratively kicked open, our livelihood taken way, our performance and dedication valueless, our family’s financial future and our healthcare/retirement in real jeopardy, and the executives still getting their salaries, stock options, benefits, and golden parachutes regardless of how they abuse employees or devastate the IBM company. If it’s not your time now, it may be very soon. Something of a stretch comparing the deaths of millions to the loss of some IBM jobs? Yes, and absolutely no disrespect intended, but the analogy is apparent.
Sometimes, fighting back – even if the end result is negative and predetermined – is the only thing left to do. If some IBMers choose to think only of themselves, collect their paychecks, pay their mortgages, be 100% loyal to a company that knows nothing of loyalty, that’s their choice. Nothing could be more obvious than that IBM’s executives expect the majority of IBMers to fall into this category. Sheep watched over by wolves. Passive acceptance and hope it “will never happen to me” – until it does. Human nature. Selfish, but completely understandable. “It’s all about me.”
If some IBMers choose to leave the company, that’s their choice. Get out while they can. Wise decision. If some IBMers choose to remain at IBM and resist what the executives are doing, in any way they can, that’s their choice. This approach will be incomprehensible to many IBMers who are myopically just“trying to make a living”. Perhaps making the company pay more for stealing pensions and jobs than for doing the right thing is motivation that many IBMers can’t appreciate. So be it.
In any company the size of IBM, filled with extremely intelligent and aggressive people, there will be significant differences of opinion on anything. It’s good that these opinions can be viewed in this forum. Many thanks to the Alliance@IBM team! If IBM continues at present course and speed, there will be nothing recognizable as IBM in a few years. The reverse Ponzi scheme of propping up numbers via cost cutting has a finite limit. The death spiral of poor service leading to less business leading to cost cutting/GR leading to worse service leading to more lost business leading to more cost cutting/GR will eventually end in the only way it can.
The current executives will be rich and gone, the remaining non-GR employees will be few and far between, the unsustainable house of cards built upon GR will be collapsing, and many will wonder why they were so passive while they were being mistreated and abandoned and one of the world’s great companies was being systematically plundered and destroyed. The IBM Holocaust is happening to us now. Each of us has a choice. We can passively accept it, we can leave, or we can fight back. Good luck to all of you, whichever choice you make. -Insurgent-
Best of luck to all. And, thank you Alliance for posting these comments. Those affected really have no other outlet and we know the Union will eventually be heard. This is an important website and effort you are putting into getting proper representation for the employees. -Anonymous
Staff are confused about how to follow new procurement rules, projects are competing for available technical resources, and different departments are being tasked to pick up the workload for staff that have been RA’d. LEAN thas only reduced the ranks but it does not appear PROPER thinking or PLANNING by upper management ahead of time to backfill processes, maintain SLA’s, or maintain the ability to service current workload or handle new delivery business for existing customers.
Questions for Dianne Diggelmann and her Junior Officer Crew: -Where are the process improvements from LEAN for ITD SSO? -Why are ITD-SSO staff across all matrixed departments stressed to meet the current SLA and delivery requirements for customer or internal business due to lack of resources or delays caused undefined or unclear processes? -What preplanning is being done from lessons learned on the layoofs 2 weeks ago to mitigate the additional certain fallout from the pending layoffs end of May? -Where is the upper management? .... -Semper LEAN Diems-
I know someone who has a relative that once reported directly to Palmisano. The words I was told from the relative were "Sam's completely paranoid. He's always checking behind everyone's back." And then there was this gem; "But the real scumbag is Randy McDonald, He's no good." Stolen pensions, no raises, gutted healthcare benefits, and layoffs. You execs have a lot to be proud of . What a legacy. I hate your guts, and I wish you the same fate as Enron's Ken Lay. -Anonymous-
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