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6, 2000 April, 2000

Highlights—August 10, 2013

  • ZD-Net: Queensland locks IBM out of new contracts. Big Blue will be banned from entering any new state government contracts in Queensland until it improves its governance and contracting practices. By Chris Duckett. Excerpts: Queensland Premier Campbell Newman has said that IBM must prove that it has "dealt with past misconduct and will prevent future misconduct" before it is allowed to sign new contracts with the Queensland government.

    "It appears that IBM took the state of Queensland for a ride," Newman said in a statement.

    The premier said that he expects IBM to discipline the employees named in the report looking into the ill-fated Queensland Health payroll system.

  • ZD-Net: IBM should have been disqualified from Qld Health payroll tender: Report. IBM never would have been awarded the tender for the ill-fated Queensland Health Payroll system, were it not for the overzealous barracking of one former employee, an inquiry into the system has found. By Josh Taylor. Excerpts: There were many red flags that should have seen IBM disqualified from tendering, or going ahead with the delivery of the ill-fated Queensland Health Payroll system but they were largely ignored, according to the report from the Queensland Health Payroll System Commission of Inquiry.

    The report (PDF) from commissioner Richard Chesterman came from the AU$5 million inquiry that commenced in February looking at why IBM won the contract to build the new payroll system for Queensland Health in 2007.

    The bungled payroll system, which was delivered later than expected in 2010, resulted in thousands of staff being underpaid, overpaid, or not paid at all. The Queensland government has estimated that the total cost for the system for taxpayers will be AU$1.2 billion. ...

    In the course of the tender, IBM also managed to get hold of the confidential bid information, including the 'not-to-exceed' price from Accenture that IBM employees had discovered on a public drive on the network of CorpTech, the Queensland government's shared services organisation.

    The documents were supposed to be stored on secured servers but the proposals and scoring matrices were made public for a period of time to anyone with a CorpTech login, which the IBM contractors had at the time.

    Chesterman said that this alone should have been enough to disqualify IBM from tendering for the contract.

    "The result is that conduct by some of IBM’s employees provided substantial grounds for excluding it from the tender process and the response of those employees in denying wrong-doing, and misdescribing their conduct, provides no basis for not acting on those concerns," he said.

  • Business Review Weekly (Australia): Each way bet: IBM rejects payroll inquiry conclusions but concedes it must take ‘some responsibility’. By Caitlin Fitzsimmons. Excerpts: IBM seems to be having a bet each way in its criticism of the Queensland Health IT payroll inquiry. The technology giant says in a statement that it rejects “many of the findings” of the inquiry – but declines to clarify which ones it disputes. ...

    IBM also says it accepts its share of the blame – but strongly hints that its rightful share is not very much.

    “As the prime contractor on a complex project, IBM must accept some responsibility for the issues experienced when the system went live in 2010,” the statement says.

    “However, as acknowledged by the commission’s report, the successful delivery of the project was rendered near impossible by the state failing to properly articulate its requirements or commit to a fixed scope.” ...

    It is not an impressive response from a public relations point of view. It may be technically true that IBM only bears “some responsibility”, but no one likes a qualified apology. ...

    IBM’s statements come after the report from the Queensland Health Payroll System Commission of Inquiry was made public earlier this week. In his report, QC Richard Chesterman describes the software failure as the biggest failure in public administration in recent history, and says IBM had an “unnatural advantage” and should never have won the tender.

  • The Register (United Kingdom): Queensland bans IBM from future work. You probably can be fired for buying IBM in the Sunshine State. By Simon Sharwood. Excerpts: The Australian State of Queensland has barred IBM from future government work, “until it improves its governance and contracting practices.” Queensland is grumpy with IBM because of its role in a billion-dollar blowout of a payroll system for its health department.

    An inquiry into IBM's role in the project yesterday concluded Big Blue staffers did not follow its ethical guidelines in bidding for the work. The report also found Queensland's government didn't help matters by offering a poor brief, poor governance and being a weak negotiator.

    The State's Premier (a title equivalent to a US State's Governor) Campbell Newman today issued a statement in which he said “it appears that IBM took the state of Queensland for a ride.” ...

    Not being considered for public sector work in Queensand is bad news for Big Blue, as the State grows quickly thanks to an attractive climate, enviable lifestyle and low taxes. While the government recently implemented austerity measures, missing out a chance to help meet the State's IT needs will hurt. There's also the wider stain to consider: bureaucrats around Australia now know they probably can be fired for buying IBM.

  • Bloomberg: IBM Furloughs U.S. Hardware Employees to Reduce Costs. By Sarah Frier. Excerpts: International Business Machines Corp. (IBM) said it’s requiring the majority of U.S. employees in its hardware unit to take a week off with reduced pay, cutting costs as demand slows for products such as servers.

    U.S. hardware workers, including those involved in development and procurement, will take a furlough week with one-third pay starting either Aug. 24 or 31, said Jay Cadmus, a spokesman for the Systems and Technology Group. Executives in the division will take no pay during the week.

    The world’s biggest computer-services company is trimming expenses to preserve profit margins as hardware revenue continues to decline. Sales in the unit, which also includes storage devices and microelectronics, slid 12 percent in the second quarter from a year earlier to $3.76 billion. ...

    IBM slipped 2.3 percent to $190.99 at the close in New York, the biggest one-day drop in more than a month. The decline wiped out the stock’s gains for the year.

    Credit Suisse Group AG downgraded the company today to the equivalent of a sell rating. IBM has fewer ways to manage its portfolio to reach its earnings goals and has seen “gradual decline in the company’s competitive position across its industries,” Kulbinder Garcha, a Credit Suisse analyst, said today in a research note. ...

    In the second quarter, Armonk, New York-based IBM spent $1 billion to restructure its workforce, cutting more than 3,300 employees in the U.S. and Canada, according to Alliance@IBM, an employee group. IBM doesn’t disclose the number of employees by country or by division. The company’s total workforce was 434,246 as of Dec. 31. Hardware accounted for 16 percent of IBM’s $104.5 billion in 2012 revenue.

    “IBM continues to punish workers with job cuts, furloughs and pay cuts while the company spends billions to buy back stock and inflate the price,” said Lee Conrad, coordinator of Alliance@IBM. “There appears to be no sacrifice at the top.”

    IBM spent $3.6 billion on share repurchases last quarter. The company raised its forecast last month for 2013 profits to at least $16.90 a share, up from $16.70, excluding the $1 billion restructuring charge.

    Selected reader comments follow:

    • They should tell their landlords to accept a week's work of rent at 1/3 of the normal cost. That should go over well.
    • "Executives in the division will take no pay during the week." Yeah...no base pay. But when they hit their profit targets by cutting employee pay, they will receive a better variable bonus at the end of the year. Disgusting. If I was one of those employees I would be praying for that divestiture to happen.
    • Sadly, layoffs are likely next, hitting skilled engineering staff. IBM has waited too long to move to either sell its HW divisions to a company or companies that can better manage and grow the businesses (as it did with the PC division to Lenovo) or to develop strategies to grow the businesses within its multitude, which has increasingly focused on services and consulting.

      Question: Will the CEO take a pay cut and reduce the usage of the corporate jet and all the concomitant social benefits? In the mean time, investors are waiting for signs that this company will pull out of a declining revenue growth pattern, with the realization that financial engineering of the numbers to keep up EPS growth is not sustainable (an argument that applies to quite a few large cap companies that are not growing top line and cutting the bottom line or financial engineering to make profitability look better than it really is).

    • They've already royally messed up Global Services by hollowing out the talent pool by cost cutting and workforce reduction. (I lived through it from about 1994 through mid 2007 as an IBM global services mainframe system programmer. I left at that point in disgust).

      So why not the hardware too? Of course at some point the chickens HAVE to come home to roost. Not that the executives care as long as they goose the stock price long enough to cash in their many stock options.

  • Slashdot: IBM Furloughing U.S. Hardware Employees. Despite forcing some employees to take an unpaid week off, IBM is proceeding with its hardware-centric OpenPOWER Consortium. By Nick Kolakowski. Excerpts: Hardware revenues have declined over the past few quarters for IBM, Oracle and other tech giants. That’s largely a reflection of client companies’ increasing interest in the cloud—why pay out millions of dollars in equipment every year, when some host firm can handle the infrastructure side of things for a fee? But that also leaves IBM and its ilk in the peculiar situation of having to maintain and grow legacy businesses that aren’t nearly as relevant as they were a few short years ago.

    This isn’t IBM’s first round of belt-tightening this summer. In June, Big Blue reportedly began cutting thousands of jobs across multiple divisions, including research, marketing, hardware and software—the result of a billion-dollar restructuring charge it took in the second quarter.

  • Poughkeepsie Journal: IBM announces weeklong furloughs after credit downgrade, stock dip. By Craig Wolf. Excerpts: It was haircut day for IBM Corp., with both workers and stockholders getting a trim. Many employees who work in Dutchess County and other sites were digesting news Tuesday they’d soon get a pay cut for a week. ...

    Most IBM workers in the Systems and Technology Group, known as STG, and some in the Integrated Supply Chain, or ISC, were told Monday they would have to take a week off with one-third of pay. ...

    Company spokesman Jay Cadmus said, “In lieu of other options considered, this approach best balances the interests of employees and the competitiveness of the STG business. ...

    Lee Conrad, national coordinator for Alliance@IBM, said the company was spending billions to buy back its own stock on the open market while cutting workers’ pay.

    Selected reader comments follow:

    • My husband's father worked for IBM, my husband still does - 50 + years. From the employee and family friendly company to was to what it is now....night and day.
    • To the executives that will get no pay during the furlough: Don't fret, they will more than make it up with your annual bonus.
    • Will the CEO also be taking part in this?
    • Of course she won't! All the top executives will continue to collect their salaries, their bonuses and their stock options!
    • They went from one of the best companies to work for to one of the worst. Their insatiable greed will come back to haunt them one day.
  • Wall Street Journal MarketWatch: IBM falls on downgrade, leads tech retreat. Credit Suisse cuts Big Blue rating citing challenges. By Benjamin Pimentel. Excerpts: IBM declined 2.3% to close at $190.99 after Credit Suisse analyst Kulbinder Garcha cut the stock’s rating, saying, “future organic growth will be challenging.”

    “Organically we believe IBM is effectively in decline,” Garcha wrote, citing among the challenges the company faces the shift to cloud that “continues to present risks given IBM’s technology positioning.”

  • Wall Street Journal: IBM Losing Favor Among Some CIOs. As IBM struggles to maintain its standing among customers in a quickly changing market, CIOs weigh-in on the company’s challenges. By Clint Boulton. Excerpts: IBM Corp., once viewed as the strongest and most authoritative of technology vendors, is struggling to maintain its standing among customers in a quickly changing market.

    “Traditionally most CIOs would normally have gone for IBM because you didn’t get fired for hiring IBM,” said Yousuf Khan, CIO of Hult International Business School, which doesn’t use IBM technology. “It was solid, it had enough recognition, credibility and gravitas. You stuck with IBM because like other established players in the services space it was considered a safe bet.”

    CIOs don’t regard IBM as they once did, according to Mr. Khan. “When the negative news is happening at multiple levels … it will no doubt catch the attention of the CFO, the CEO, and the industry peers in general,” Mr. Khan said. Is that enough to compel CIOs to pause and think twice before they sign a deal with IBM? “Absolutely,” he says.

    There has been plenty of unsettling news about IBM as of late. On August 7, the premier of the state of Queensland in Australia, Campbell Newman, said he had banned IBM from entering into new contracts with the state until it improved its governance and contracting practices. The company has also been at loggerheads with state officials in Pennsylvania, Indiana and Texas. ...

    DC analyst Crawford Del Prete said that IBM’s “Smarter Planet” initiative to improve municipal operations with hardware and software comprises mostly small projects rather than large, revenue-driving deals. He said that while IBM focuses on this work Salesforce.com Inc. and other cloud vendors are “disrupting them from a bunch of different angles.” He said IBM should buy into more market areas that are growing faster, such as cloud software and analytics. “Growth that really moves the needle is becoming very, very elusive,” Mr. Del Prete said.

    IBM spokesperson Edward Barbini declined to comment for this article. ...

    CIO sentiment about IBM ranges from frustrated to indifferent. Daniel Petlon, CIO of Enterasys Networks, a Siemens Enterprise Communications GmbH & Co.-owned company, said he uses IBM applications for configuration management, supply chain and expense reporting. But he’s switching to supply chain software from SPS Commerce this year because he said IBM increased the licensing fees on his data integration software after it acquired its maker, Sterling Commerce. “Typically when they acquire a company, they crank the license fees up at the first opportunity they get to do it,” Mr. Petlon said. He said this has made “me cautious about working with them.”

    Selected reader comments follow:

    • CIO’s know that IBM is a company that is all about making profits. Unfortunately many of the people that IBM fired over the past 5 to 7 years have turned up working for former IBM customers. As such, it will be very difficult to get a positive recommendation from many former IBM Alumni. IBM should take a page from PWC and many of the other professional firms. People are not widgets.
    • As a CIO, I can confirm that IBM has lost it’s edge. IBM’s pricing practices for licensing and delivery are predatory and with the recent staffing model changes there is no assurance of success.

      As a CIO my view of IBM has changed from “high priced but I know that IBM will deliver” to “high priced and not differentiated”, so in the managed service market IBM has lost its selling point. In the cloud market IBM is getting hammered: Office 365 is eating IBM’s lunch; AWS is 100x better than IBM’s smart cloud (with the additional bonus that you do not need to deal with an IBM PE).

      If IBM will want to keep their promises to the street all they can do is squeeze their existing customer and employees, they have been very good at doing this for the last 4 years, however this is not something you can do forever.

    • IBM has been losing it’s edge slowly for several years now. They’ve been trying to counter with job cuts and share buybacks to keep the EPS up, but this provides the illusion of growth. Senior management has been caught in the cloud movement, and because of IBM's size, can’t move as quickly as their competitors. They rely so much on the licensing model, moving away suddenly would be disaster short term, especially with limited cloud revenue to back fill. The article is pretty accurate, IMO.
    • Hate this company to the gut... wrote: …if I ever become CIO/CEO which I know I will one day, IBM will not see a dime of my IT or my company’s budget. Upgrade hardware to faster processor – Pay more licensing, Dual core to Quad core chips – Pay more licensing, so many audits from this one vendor in one year is more than all of our other vendors combined in years. Non-trusting, greedy POS of a company. Who says MS is evil, it is the most trusting company and most flexible company we have worked with. You want Evil, you call IBM !!!
    • As a large business partner of IBM’s they are very frustrating to work with. One day IBM is your best friend and the next day they are stealing your accounts. I consult directly with many CIOs that are amazed at some of the confusing and misleading messages they are given by their sales rep (who is usually switched every six to twelve months). I think this article is right on. IBM doesn’t matter in the cloud and their messaging on who and what they stand for is confusing, especially as it is relevant to the cloud.
    • Having worked within IBM for 20 years I’m an executive at a large software cloud provider which uses IBM midrange (iSeries) servers. I made a great decision in leaving IBM voluntarily and seeing how IBM treats its’ customers with licensing terms and pricing (charging multiples higher to “allow” a system to run i5/OS rather than Linux) I am never looking back. They are not in my future hardware strategy. IMHO commenters who are stating this article doesn’t speak the truth are not aware of the downfall of IBM in the last number of years.
  • The Motley Fool: Pennsylvania Department Cancels IBM Contract. By Dan Radovsky. Excerpts: Pennsylvania is pulling the plug on an IBM computer project that it says is 42 months behind schedule and more than $60 million over budget, the state's Department of Labor and Industry announced yesterday.

    The IBM computer system, known as the Unemployment Compensation Modernization System (UCMS), was designed to calculate and provide unemployment compensation benefit payments.

    However, a study commissioned by the Department of Labor and Industry and carried out by Carnegie Mellon University's Software Engineering Institute found "The Contractor [IBM] track record of ineffective project management led to weaknesses in process and practice discipline."

    "The bottom line is that the problems we've identified cannot be solved and we will not renew our contract with IBM," Department Secretary Julia Hearthway said in the department's statement. "The level of risk, combined with the critical nature of the system, demands that the Department of Labor & Industry has a system that produces timely decisions reliably and accurately." ...

    IBM spokesman Scott Cook said in an emailed response to a request for comment that the company was "surprised by yesterday's announcement. The decision is based on a third-party report that we had not seen at the time of the Commonwealth's announcement, despite repeated requests to the Department of Labor and Industry to review it together in the normal course of a working relationship ... [W]e stand ready to work with the State to resolve this matter."

  • Yahoo! IBM Employee Issues message board: "Re: State dumps IBM after IT project runs 42 months late, $60M over budget" by "dogbreath127k." Full excerpt: ...IBM contributed to the project's problems as well, according to the report. 'Another concern has been instability in [IBM's] workforce,' it states."

    "After some design documents were finished in 2008, IBM took a large number of business analysts that had become the 'memory' of the state's business requirements, off of the project: 'This decision created a significant knowledge gap as the program entered the critical application design and development phases'."

    "Staffing changes weren't confined to the business analysts. In fact, since the project's start 638 IBM contractors have worked on it, 'with the majority of the workforce having less than one year on the project and 75% having less than two years,' the report states."

    Editor's note: The source of the above quotes is from ComputerWorld: State dumps IBM after IT project runs 42 months late, $60M over budget.

  • Yahoo! IBM Employee Issues message board: "Re: State dumps IBM after IT project runs 42 months late, $60M over budget" by Lee Conrad. Full excerpt: Instability in the workforce? You betcha! Here are some numbers the Alliance received: Of the 88,150 total IBM USA population there are: 6,853 vendors; 12,087 contractors; 2,959 supplemental; 66,251 regular IBM employees.
  • Yahoo! IBM Employee Issues message board: "Re: State dumps IBM after IT project runs 42 months late, $60M over budget" by "trexibmer". Full excerpt: Contractors and vendors are temp workers. Here now and gone in a nanosecond. Supplementals are not full IBM employees. RAs can come at any time to negatively affect present IBM employees and the customer contract work and fulfillment they do. Workforce stability is measured by an even employee base.

    So it is not a stable USA IBM workforce. There is not enough of continuity of intellectual capital now to effectively do day-to-day business. LIFE IS NOT GOOD at IBM right now because of it.

    No wonder IBM doesn't release employment numbers anymore. They themselves know how unstable their workforce is and don't want the customers or the government even to know. No wonder IBM is losing contracts, customers, and whatever scant revenue they have. Better, new leadership is needed as well as a growing union to try to get a stable workforce ASAP!

  • Yahoo! IBM Employee Issues message board: "Re: State dumps IBM after IT project runs 42 months late, $60M over budget" by "dogbreath127k". Full excerpt: I am seeing some lower-level IBM management being pushed out the door with this recent RA. Many claim they are "retiring", but the timing and quantity don't suggest this was a personal decision.
  • Yahoo! IBM Employee Issues message board: "Re: State dumps IBM after IT project runs 42 months late, $60M over budget" by "divaberyl". Full excerpt: Good for them. Many were waiting for a package to be offered. I begged for one as soon as I was eligible to retire but left without one.
  • Yahoo! IBM Employee Issues message board: "Re: State dumps IBM after IT project runs 42 months late, $60M over budget" by Lee Conrad. Full excerpt: One of the problems (in determining the number of IBM U.S. employees) is giving partners, contractors and offshore workers us.ibm.com addresses.
  • Yahoo! IBM Employee Issues message board: "Re: State dumps IBM after IT project runs 42 months late, $60M over budget" by "ibmretiree2006". Full excerpt: Exactly! An attempt to fool customers into thinking they are interacting with badged employees.
  • Unión Informática (Bulgaria): Union: IBM Bulgaria Convicted of Discrimination. Full (English portion) excerpt: On July 15th, 2013, the court of discrimination of Sofia Bulgaria, IBM has condemned person Bulgarie for labor-union discrimination. Discrimination to the president of this organization and staff representative, morale harassment, intimidation, persecution and Violation of the labor code is not respect basic right. It is a big victory for the respect for the right work-union and for the respect of to use of IBM Bulgaria, Because it is the one as any IBM Bulgaria do not respect the labor code in Vigours In this country These Appropriate nor even to employ. But for all that the fight is not finished Because IBM Will certainly appeal of this big decision Because Their habit and to appeal court decision for removing Which does not suit to them.
  • I, Cringely: Fulfilling customer requirements is a weapon at IBM. By Bob Cringely. Excerpts: There are several new data points this week in the ongoing cratering of IBM as an IT vendor. The state of Pennsylvania canceled an unemployment compensation system contract that was 42 months behind and $60 million over budget. Big Blue has been banned from the Australian state of Queensland after botching a $6.9 million SAP project that will now reportedly cost the people of Queensland $A1.2 billion to fix. That’s some botch. Credit Suisse analyst Kulbinder Garcha says IBM has a cash flow problem and downgraded the stock. At IBM’s Systems & Technology Group, management announced to employees a one week mandatory furlough at the end of August or beginning of September. And finally, I’m told that there is now a filter on the IBM corporate e-mail system that flags any messages that contain the word Cringely.

    I’m flattered.

    These are acts of desperation and I can only conclude that IBM can no longer make the decisions necessary to save itself. It is so fixated on its goals and so sure its process is the only right way of doing things, it cannot see alternatives

    The Australian IT project debacle is a classic example of IBM’s unique way of managing projects. The core of project management is “documented deniability.” They will do exactly what you tell them. They will document it. They will work against the documented requirements. When done, you have to pay them because they did exactly what you told them. The key problem to this approach is “does it work?”

    The ultimate goal of every project is to build something that produces value or income. A factory makes products. A bridge assists transportation. In IBM’s project management IBM does not care about the ultimate goal. That is their customers concern, not IBM’s. This is very important for IBM’s customers to understand. It is the reason so many big IBM projects are failing. ...

    When a highway department wants to build a bridge, there are both stated and unstated requirements. The project manager and engineers start with the stated requirements and find and analyze all the unstated requirements. A highway department will have a general idea where the bridge should be built. In the analysis the bridge building firm may discover important reasons to build the bridge in a different location. The firm will look at traffic patterns and recommend and optimal design to meet the highway departments ultimate requirement — to make long term improvements in transportation.

    If IBM built that bridge, they’d build it exactly where the highway department suggested and how they suggested. If the foundation was weak the the bridge started to tilt, it’s not IBM’s fault. You told them where to build the bridge. They did what you told them. They also never analyzed every aspect of your requirements. They did no testing. They did no prototyping. They just do what you tell them to. ...

    Fixated solely on its 2015 earnings target, IBM is making decisions based solely on their balance sheet. They are ignoring and damaging the overall operation of their business. They have the time and the money to save the company. Yet they are doing more and more things that are ultimately destructive to the very survival of IBM.

    Selected reader comments follow:

    • Former IBMer. So far this year IBM has:
      1. Frozen employee 401k contributions until the end of the year — those still employed will get their contributions Dec 15th.
      2. Pushed back any sort of pay rise from the typical July period until the end of the year — no pay rise for even their top performers as rated on the 2012 year.
      3. Forced their STG employees on a 33% salary one-week vacation (apparently contractors get 0% pay for 2 weeks mandatory leave).

      Typically their rounds of Resource Actions (or whatever positively spun phrase they have coined for layoffs) hit the low end staff, those that consistently fall to the bottom of the pile at PBC time etc.

      Interestingly with the above 3 measurements the employees being hurt the most are the ones IBM should be desperately trying to retain. Of all the former co-workers I’ve talked to this week, they are either impartial or modestly happy with the furloughs. The top performers however are increasingly frustrated and even those I never thought would talk about leaving are doing just that.

      Considering a huge number of STG employees impacted are in the Research Triangle area of NC where there is a heavy tech presence I wouldn’t be surprised to see only those employees IBM really doesn’t want to lose jumping ship, leaving an already dwindling and suffering US workforce to contend without the people that could always be counted on to do the work. I don’t doubt IBM will make it to 2015 as a company, but I wonder what the caliber of their US workforce will be.

      Oh well, at least there’ll be plenty of new hires from the “emerging markets” to do the work. Because that’s been working out so well…

    • Gyro. Your IBM stories are quite interesting and should give pause to anyone considering investing in IBM or seeking a job there. It reminds me of how EDS seemed to work 20 years ago (per my wife’s experience) and look where they are now (sucked into the bowels of the new HP that also seems to be in a slow death spiral).
    • Anon. It should be a wake-up call to the government deciding IBM’s objection to Amazon winning the CIA cloud contract. It shows CIA and GAO review were correct in assessing IBM’s technical abilities and unanticipated costs.

      It is almost painful to read some of IBM’s claims the other day about their cloud experience “rears”—fact, IBM’s commercial offering is only 4 years to Amazons. IBM’s largest customer is itself as part of internal cost cutting. IBM has been playing catch up to Amazon (AWS) for years.

      IBM’s claim “40 years experience with virtualized environments”; how does main frame MVS/VM operating systems count the same as VMware? That’s stretching the truth. IBM sales adage “I never tell a lie, but, I never tell the truth”?

    • DarthVaderMentor. Bob, Congratulations on your admission into the IBM “email rogues gallery”. You join a long list of people over the years, starting with Jerry Churchhouse.

      A very inciteful comment on the unique aspects of customer solution engineering and project management in IBM. The old saying from Bob Howe (as endorsed by the CEO) was “if it’s not in the contract in writing it's charity to be charged to you” if you even think of doing something extra for the customer/client! As an engineering, architect, manager and executive, I found this unsettling for one who wanted to get things done right (even ethically) but how you describe it has been the case as long as the finance people run the asylum. As long as finance and legal run the circus!

      The elephant has gotten hit with a bullet hole between the eyes years ago and is dead, but it just keeps moving primarily on the inertia of the brand blinded customers impressed by the ghosts of IBMers who really cared to get the job done right at any cost decades ago, now long gone and fired. It’s just going to take a few more years for all of us and the leaches riding it to realize it’s dead.

    • zubes from brissy. Yes, here in Queensland I’ve been following the Queensland Health payroll mess with interest. IBM's latest excuse is that requirements were not properly articulated and a fixed scope was not committed to. I’m sure the blame can be spread to all parties. Whistle blowers on the radio have been heavily critical of the tender process that gave IBM this work. This fits with what you say about IBM following requirements to the letter without regard for the customer and the end product.
    • trexibmer. Dutchess County and the State of New York can’t even get the employee headcount numbers from IBM since the numbers are supposedly “competitive” and “sensitive”. It is this only in IBM’s jaundiced eyes.

      Good Luck, Kieran. Ask Greg Ball what the IBM employment number is. IBM didn’t tell him. Better yet ask Governor Andrew Cuomo to see if he has a clue about how many employed by IBM in NY State where PILOT and generous property tax breaks are given to appease IBM. Supposedly IBM has to ensure a number of employment (i.e. jobs) to qualify for these State programs.

    • Dr John. IBM sounds like an aircraft trying to fly. Increasing profits is just the same as flying higher. As the speed slows, that is less business for IBM, you need to pull up to keep that altitude; more to increase profits. Working the air harder. But there comes a point where you’re going too slow for the wings to give you lift. IBM is going to stall.
    • jafi. Continuing with that analogy…once into that stall we’re gonna go rapidly past incipient spin into a full spin…most of the qualified folks who could recover us from that spin have either escaped to better jobs or have been fired. Within a sickeningly short period of time we’ll be nothing more than a big smoking hole in the ground. And as with any such accident the seeds were sown a long time ago – literally years ago – the rot has been growing for a long time now.
    • jafi. >>And finally, I’m told that there is now a filter on the IBM corporate e-mail system that flags any messages that contain the word Cringely.

      Bob—my congratulations. I can share that your e-mails are still getting through the corporate e-mail system (at least in my part of the world)—so they’re not blocked as such, but then again you used the word ‘flags’. That concerns me (nah, not really—I’m past caring) that the corporate thought police will be on to me and like minded IBMers—how dare we follow you, how dare we want to know what the hell is happening to our once great company—we should be happy being kept in the dark and fed BS. After all that is the IBM way.

      What with the furloughs, Credit Suisse analysis around free cash flow, sinking stock price and regular news of yet more failed IBM projects (and don’t forget the RA’s which have happened already this year and the more yet to come over the coming months) I’d suggest IBM is rapidly approaching a critical point in its once proud history.

      At current course and speed things will implode soon – either that or we’ll have a regime change – though I’m not sure the board has the guts to get rid of Rometty.

      Keep the articles coming – it’s good that between your posts and the Alliance website us IBMers have at least some voice and mechanism to share our thoughts with the wider community.

    • John. Folks like Amazon, Google, Yahoo, and others quickly grew their business and systems well past the traditional computing model. They had to develop a new infrastructure and application design. To these firms the “cloud” is a highly capable service that is super reliable and inexpensive to operate. IBM is still stuck in the traditional computing model and doesn’t understand the full nature of cloud computing. This becomes obvious when you look at their cloud offerings.

      Folks like Amazon, Google, and other became wildly successful because they were open to new ideas and were willing to challenge the validity of traditional forms of computing. IBM has a stunningly poor corporate culture — new ideas are rejected, communication is guarded, management doesn’t listen.

    • Joe. Great comment John, especially the last sentence. I spent over two decades at Big Blue and witnessed the corporate culture take a rather steep nose dive, particularly as the senior leadership became infiltrated with 70′s and 80′s business school MBA graduate types brain-washed in ‘shareholder value’ theory. They were not, nor never have been, technical in nature and therefore grasping the wide-scale technical requirements of a large project such as the examples you mention simply wasn’t in their one-dimensional capability.

      Worse, the condescending way they viewed and interacted with the technical ‘help’ was beyond indignant. The culture began to resemble a quasi ‘caste’ system for lack of a better analogy. The execs were the landlords, the techs the low-level serfs. If a tech sent an email to an exec, nary a response would, or should, be expected.

      The most glaring example I witnessed was when a senior project manager once said to me ‘the success of a project must be viewed as 5% technical and 95% customer perception.’ I quickly reminded this non-technical PM that if the technical aspects of the solution do not function properly, no amount of perception will make up for a failed computing implementation. But this PM was adamant about the stated premise. I knew then, more than ever, how leadership viewed these projects and being a long-time (and rather talented, I might add) I/T technician, this flew in the face of what I had witnessed and learned over the course of 40 years pressing the keys. My gut feel was ‘these people do not have a clue.’

      I knew then, particularly with the ramping up of offshoring and endless layoffs of talent in the name of EPS, It would only get worse going forward. Therefore I left and found an opportunity where they appreciate solid technical talent. From what I hear from former co-workers, the talented are jumping the big blue sinking ship in droves especially as the economy has improved. Even more so, as companies are drifting back to the insourced model, opportunities for those who can are sprouting every day. Never before has it been more true – buyer beware!

    • John. There is the old saying “the operation was a success but the patient died.” Shareholder value, EPS, are not the only measures of a successful business. There are many other measures and there needs to be a balance in what is expected. If you focus too much on a couple measures, you will miss other important data points and make poor decisions. IBM is so fixated on the 2015 plan and the quarter to quarter earnings statement, it is failing to notice its vital signs are weakening, organs are shutting down, the company is in distress.
    • Another John. Many years ago IBM decided it was more profitable to do a less thorough job, run the risk of failure, and pay the penalties for those failures. They figured they were spending more on quality than they would if they just let things break. This decision, this mindset has spread through the whole company. If you can get by not doing something, don’t do it.

      Since then customer satisfaction has suffered, business retention is poor, every contact is challenging. IBM is so desperate for new business they will do anything to get it, then do their best to lose it.

      Philip Crosby made the point in his book “Quality is Free.” When you have imperfect quality you spend a lot to fix it, deal with it, manage it. You should see how many people IBM has today “managing” the mountains of problems on its accounts. You should see how many hours their DPE’s and SDM’s work and the stress they’re under. IBM is now paying dearly for their poor quality. IBM’s quality problems have now become a cancer to the organization and its long term viability. This is not something they can continue to “manage through.” Until you fix the source of the problem, the massive problems will continue.

    • Thefielder. First, I am not amazed that IBM management is not wanting employees to read sites like Cringely, they want to spoon feed the employees the corporate “line” and have them accept it as gospel. Fact is the days of trusting the corporate masters and believing what they say, as truth, has now passed, IBM hasn’t gotten the message yet.

      Now, the point I want to pass on, and have great knowledge of in conjunction with Bob’s treatise is the following. IBM has always had a robust business partner channel. Business Partners contribute a significant revenue stream to IBM allowing IBM to focus on enterprise accounts. Benefits to partners included discounts on HW and SW via their “mall”, technical support, sales leads, and a strong annual conference.

      Most of these benefits have eroded over the last few years where now partners have to “earn” these benefits. IBM expects them to optimize on the latest technologies without much in terms of support. Many partners are questioning the value of the IBM partnership. In fact, IBM now expects them to produce revenue period. This channel is getting upset. Developer Relations, who run a lot of these programs have cut back resources and manpower significantly.

    • bob. The problem with IBM project managers is that none of them are technical. They are all prided and rewarded on being PMP, senior PMP, senior specialized executive certified PMP or whatever it is they like to add to their email signatures. What do project managers who have no technical knowledge and don’t understand what the implications of a technical project are, do? Well, they manage scope and change. Any evaluation of a technical requirement which almost always results in something else for the better, especially in the software world, is considered scope change by these morons and for which you have to go through some ridiculous change management process to implement and to which they object because they just don’t get it.
    • reply to bob. Bob, that is a very good observation. Thanks. If you look at most construction, highway, or manufacturing projects you will find the PM has many years experience in the field and has some technical skills. If IBM were to bid on a bridge project they would not get past the first round on bidding. Quite bluntly the sales person and the project manager would be unable to answer the questions asked. Perhaps that is a key to the problem.

      For years IBM has been notorious for going to and selling to the execs of a company. They bypass the technical folks, middle managers, and schmooze their bosses. Senior managers in most companies are not “technical.” That is not a criticism, they have special talents for what they do, it just does not involve designing computer applications. Yet IBM targets them and finds ways to keep ‘those in the know’ out of the meetings.

      Somehow when IBM fails they are always forgiven. That is another of IBM’s interesting talents. If I was selling parts to a factory, didn’t deliver, and disrupted their production — it would be a very cold day in you-know-where before that factory would consider doing business with me. In most lines of work you never, ever mess up your customers business. But IBM is doing that every day — and getting away with it.

      If people familiar with application development, or system management, or, were involved in the decision making process, IBM would get a lot less business. When IBM would make a sale the expectations would be clearly defined, the results would be monitored, and there would very little wiggle room. Like everyone else IBM would be expected to deliver what it promised.

      IBM’s use of generalist project managers is yet another indication of how IBM views its business and its customers.

      IBM does have some very good project managers. However, this too is a skill IBM believes it can ship offshore and do remotely. When you are building that bridge, there is no substitute to watching the crew pour the concrete. It is easy to see if the concrete supplier brought you good product. It is easy to see if the crew knows what they are doing. Doing things remotely over a phone using a second language is a very poor way to manage a project. But as we can conclude from these columns, IBM does not care. Their selling to our exec’s not us.

    • Right on. Reply to bob, you are absolutely right. I was on a call a few week ago for a GBS project and the project manager had no idea what she was talking about to the customer. It was an embarrassment to hear someone who was talking about anything but technical facts. When the customer asked a few technical questions, she was struck dumb, and then deferred to the technical folks like myself on the team.

      Yes, IBM has some very good PMs, but the majority of these certified PMs are non-technical people who got an IBM certificate, stating they are IBM Certified PMs and IBM Certified Executive PMs and act as though they have the ability to walk on water and better. These certificates have ZERO value in my opinion, if said PM does not know what he/she are talking about ! I would never hire an IBM Certified PM without a rigorous grilling, because it would be a total waste of money to do otherwise.

    • Steve. I’m just disappointed that I spent nearly 3 decades honing my denial of what the people at the helm were really about. I bought into the “corporate values” and the rest of the rah rah (e.g. “six sigma quality”, “transformation”), all the while bucking inner suspicions that nothing of lasting quality could come of the endless stream of clueless personnel and technical decisions, or of career promotion being proportional to obedience, while inversely proportional to hard work and innovating first in one’s approach and methods, and then in the products themselves. My 3 rating in January was a stunning display of what I want to call business mental illness.

      Please enjoy some Beatles songs spoofs inspired by too many hours of scratching my head over the ongoing insanity that I experienced while attempting to develop software in that psychotic environment. Some of the lyrics were inside jokes for coworkers at the time, but many will ring true to anyone who had what they imagined to be a career there. http://jethrick.com/gdbeatles/

      That said, I thought their separation package was generous. But even so, I kind of miss my identity being heavily defined by my deluded sense of working for the best company, a company that I believed respected individuals, and was with me in being committed to every client’s success.

    • BobRuub. Always a bad sign when companies “force” employees to take leave, next step is to asks everyone to take a temporary pay cut (for the good of the company) or try and merge with a big company and use the confusion as an opportunity to delay the inevitable. Saw the same thing at HP when Carly was in charge 10 or so years ago all three were tried and HP hovers on the edge of irrelevance.

      On another note, ran into some HP consultants lately who want to wrap a whole layer of technical complexity on a project (all these dependencies and cost laid on my door-step) because it made it easier for them. Needless to say my response was a emphatic NO, come back with a better solution.

    • BeeBernard Robertson-Dunn. Ironically, I wrote a paper published in the IBM Journal of Research and Development, Volume 56, Issue 5, September/October 2012, that said, et al, the value of a solution comes from the problem it solves and that requirements are usually suspect. If anyone’s interested it’s called Beyond the Zachman Framework: Problem-oriented System Architecture and can be found here: http://www.problemsfirst.com/docs/Problem-orientedSystemArchitecture.pdf
    • LostinEurope. The reported project issues in QLD, PA etc. are only tips of the iceberg. there are plenty of similar, to be eruptions of projects in Europe, with red ink project control status. Red ink financially and off schedule. IBM TSS (the maintenance guys) controllers and execs now even take aggregated risks on down sizing spare part stocks for committed recovery services contracts to beef up profits. Literally speaking: “lets take the risk of paying the penalty first, and then we will see…” RAs on TSS staff add to the worse here.
  • Other articles by Bob Cringely concerning IBM:
  • Assemblyman Kieran Michael Lalor press release: Statement on IBM Furlough Announcement from Assemblyman Kieran Michael Lalor (R,C,I - Fishkill). Excerpts: "Coming so soon after IBM's June layoffs, the furlough announcement is frightening news for many Dutchess County families. In this battered economy, families can't afford another hit. IBM, owes the Hudson Valley answers about it's long-term commitment to the region. IBM has been a critical part of our local economy for decades. In return, Dutchess County and New York State have provided IBM with valuable, sometimes controversial, tax benefits. We deserve answers."

    "IBM also needs to explain whether they have tried to issue furloughs at their overseas facilities before they began furloughs at domestic plants. IBM has received hundreds of millions in tax benefits from New York. Those benefits should come with more transparency from the company. We need facts and figures on the jobs those subsidies supposedly create or retain. We need to know their long-term plans."

  • Poughkeepsie Journal: IBM shifts some Poughkeepsie jobs to contractor. By Craig Wolf. Excerpts: Some of the assembly work at IBM Corp.'s Poughkeepsie plant has been given over to a contract company, Jabil Circuit, Inc. An IBM spokesman confirmed that Jabil, which has long been resident at the local plant, has been given another segment involved in assembling mainframe computer boards. ...

    He said "a number" of IBM employees working in this unit had been offered jobs doing this work as Jabil employees. ...

    The shift comes as 697 IBMers at the Poughkeepsie and East Fishkill plant face the end of their jobs in September as part of a large "resource action" the company rolled out in June.

  • The Register: IBM CIO's Great Refresh: No, Sales Guy, you can't JUST use DropBox. Rip XP from 500k boxes, bung software in cloud, install Ffox. Coffee. By Gavin Clarke. Excerpts: She might be CIO of IBM, but Jeanette Horan is just like you: replacing Windows XP with Windows 7, ripping out Internet Explorer 6 and floating a growing amount of software on the cloud.

    She also has to contend with staffers begging her for the ability to share information using third-party sync 'n' share apps like DropBox. Sound familiar?

    OK, she's with tech behemoth IBM, so the scale is much bigger: Horan has shifted nearly half a million PCs off Microsoft's legacy OS and reckons up to three-quarters of the apps built by and for IBM - as opposed to product software - will be developed and tested on the cloud by the middle of next year. ...

    There's also pressure from customers and IBM's product people, both eager to see you use the latest IBM hardware and software. And then there's pressure from management, as IBM is the kind of business that sees technology as an integral part of strategy rather than some supporting character.

    The latter means Horan’s on the front line of the battle to get IBM to hit management’s target of $20 earnings per share by 2015 under its latest five-year plan issued in 2010. In 2010, its EPS was $13.44.

    As if more pressure were needed, the revenue-generation side of IBM that would normally help it hit that EPS number is sliding. There have also been job cuts - up to 3,000. In its second quarter, IBM recorded its second revenue drop of the year - down 3.3 per cent to $24.82bn. Net income was muddied by the job cuts - down 16.9 per cent to $3.23bn to include the layoff charge. ...

    Dropbox, along with Microsoft’s Office 365 and Google Docs, is officially not allowed. This is because they’d break IBM’s guidelines on the use of secure computing and social media, which staff are expected to know as part of IBM’s annual business conduct certification process.

    The rules prohibit storing client-confidential information on a service. IBM offers it’s own alternative: IBM Connections, which has file-sharing and the ability to create private spaces within spaces.

    Selected reader comments follow:

    • IBM Software. Perhaps off tropic but my experience with any IBM software I have used in the past has been beyond horrible. I wonder what it is like for internal employees to have to use IBM software for every aspect of their daily grind.
    • Re: Dropbox everywhere. I can assure you that IBM Connections is not a Dropbox replacement. It doesn't do folders (yes, you read that right, it doesn't do f*****g folders, so its a flat file based repository). It doesn't do replication. It has a maximum of 500MB in total for all the files. It does have RSS (wow). It is slow and sometimes it will not download largish (> 15MB) files. It just hangs. It doesn't have an API. Apart from that it's identical to DropBox.
    • Re: "Building apps for Big Blue". You're the one responsible for w3 search? You have a lot to answer for.
    • Never heard such bullshit. IBM back office processes are crap, support is laughable and everything is shoehorned into lotus notes or lotus connections. Slow, poor user interface, American centric.
    • Re: Translation needed. Things have changed a lot since 1978. You're now not allowed to use planes, or trains for that matter, if there's a remote possibility you could drive. So 15 hours spent on the road, two nights in a hotel + meals is preferable to a flight/train, a full day at the client and another flight/train in the evening with another 2 days free to do useful work. But the expense guy doesn't care about how you waste your time because that's not his remit.

      Smarter Planet? Not really.

      As for Dropbox, we're also not allowed to use non-IBM USB sticks to share documents with a customer. And of course, there's no funding to buy the IBM ones. So everyone just breaks the rules, rather than saying to the customer "No you can't have a copy of the presentation because doing so would violate corporate standards".

      There are worse places to work though.

    • Re: IBM Software > I wonder what it is like for internal employees to have to use IBM software for every aspect of their daily grind.

      Do you like Notes and Symphony? Do you like a badly siloed, poorly designed support intranet. Mandatory software installed that cannot be removed on penalty of job loss that DOES NOT play nice with the OS and may be a duplicate of a different brand of mandatory installed software?

      Yeah, it's like. Exactly like that. Anon for obvious reasons.

    • Even by IBM standards, that's some total BS. Ex-IBMer, have the 1000 yard stare to prove it: Lotus Notes at IBM is singularly the worst bit of software I've ever used, anywhere, period. Took over a month to get a new laptop. I don't think I ever found anything I was looking for on W3. On and on and on.

      The fundamental issue with IBM is not that it doesn't have the knowledge and capability to have the world's greatest IT infrastructure - it does - but that there are so many career-obsessed middle managers all falling over themselves to knife each other in the back that by the time stuff is rolled out the workforce it has been obfuscated beyond the point of usability in the interests of someone's 'internal brand'

      If you really want to understand IBM these days; When the last edict about cost cutting came out, ITS management instructed that we sales specialists should be charging customers our travel costs when we went to see them on a sales call. "Yes, this XYZ will transform your business Mr Customer... now give me £30 for the train fare home".

      It never ceased to amaze me how many apparently intelligent people would buy a sub-par service at three to nine times market rate just because it was IBM.

    • I had to re-read the front page of this story. I had to re-read the front page of this story, and check the date. I thought maybe something from 2001 cropped up into the mix. This is a leading tech company and they are just now moving from XP to Win7? SELL IBM NOW! SELL SELL SELL.
    • So nothing has changed. Since I was put out to pasture by GSA in 2003. We had a 600 page design doc which took forever to load because we were only allowed 4mb of RAM in our IBM PCs. Work day went like...log in...get cuppa while machine is loading profile...find document and open...morning meeting while waiting for doc to open...ctrl+end to get it all onto disk cache...get another cuppa while it is doing that...start doing whatever. All charged out out at $150 per hour.

      The RAM was twice as expensive as normal RAM as it was +ve polarity instead of of -ve - but if we bought it internally it cost $500 a stick, but $85 at nearest computer shop and a manager was sacked for buying externally even though his project was the only one running on-time/budget in the state.

    • Re: Translation needed "There are worse places to work though". There may be worse places but I think if you put them on a scale of 1 to 10, where 1 is bad and 10 is good, they'd be around the 1 mark.
  • Yahoo! IBM Employee Issues message board: "IBM Employee Headcount - Exact Numbers" by "thirtyyearibmer". Full excerpt: The other thread was getting a bit long with too many different threads, so hopefully this will help the headcount discussion with factual data and more extensive data points for reference.

    Here are the employee numbers from IBM's Annual reports. I have these in a spreadsheet along with most IBM data from its annual reports dating back to the CTR Corporation days in 1914. I have the total IBM employee headcount reaching back to 1914 with only a few gaps. Breaking out the World Trade, U.S. and supplemental data is a bit of work and taking time and some data will never be available. The data does have gaps but getting more complete as I gather information for my next book, "A View from Beneath the Dancing Elephant; IBM and The Changing Face of American Corporate Culture."

    Anyone that wants to help fill in the gaps, feel free to contact me and convince me that you are in a position to have access to "real" IBM U.S. employee data, not hypothetical or wishful thinking. Since IBM doesn't release the data any longer, I will make some assumptions in my book (i.e. it is still decreasing at a rate equivalent from when IBM quit providing numbers. If they don't like it they can always publish the numbers in their annual report again.)

    U.S. Headcount: (peak U.S. employment was 1985 when IBM and John Akers finally realized IBM wasn't going to be a 100 billion dollar corporation by 1990 as John Opel forecast in the press in 1980.)

    1978 - 180,924
    1979 - 190,319
    1980 - 194,306
    1981 - 205,142
    1982 - 214,352
    1983 - 218,601
    1984 - 238,888
    1985 - 242,241
    1986 - 237,274
    1987 - 227,949
    1988 - 223,208
    1989 - 206,000
    1990 - 205,500
    1991 - 186,569
    1992 - 2004 - a gap in U.S employee numbers but 50K (25% of the US workforce) cut between 1991 and 2005 while revenue grew after 1993 at rates of 2.13%, 12.31%, 5.57%, 3.37%, 4.02% and 7.2%.
    2005 - 133,789
    2006 - 127,000
    2007 - 121,000
    2008 - 115,000
    2009 - 105,000
    2010 - will be extrapolated (average of approximately 6K per year)
    2011 - will be extrapolated (average of approximately 6K per year)
    2012 - will be extrapolated (average of approximately 6K per year)
    2013 - will be extrapolated (average of approximately 6K per year) 2014 - will be extrapolated (average of approximately 6K per year)

    Complementary Employees as defined in the IBM Annual report is the following, "an approximation of equivalent full-time employees hired under temporary, part-time and limited term employment arrangements to meet specific business needs in a flexible and cost-effective manner." This is an interesting number that started being broken out in 1992 and peaked in 1997.

    1992 - 35,468
    1993 - 45,989
    1994 - 58,200
    1995 - 64,868
    1996 - 65,033
    1997 - 63,751
    1998 - 58,604
    1999 - 46,976
    2000 - 47,386
    2001 - 46,703
    2002 - 39,532
    2003 - 35,884
    2004 - 40,276
    2005 - 36,972
    2006 - 38,783
    2007 - 40,411
    2008 - 39,625
    2009 - 38,367
    2010 - 37,118
    2011 - 33,023
    2012 - 32,749

    These are the real numbers not hypothetical or wishful thinking.

    The earliest numbers I have been able to find so far that break out World Trade and U.S. are in 1949 Annual Stockholder's meeting for fiscal year 1948 when Tom Watson Sr. stated, "19,045 in the U.S/Canada and approximately 6,000 outside the U.S for a total of 25,045 and from the 1962 IBM Annual Report when it was 81,493 in the U.S. and 45,975 outside the U.S./Canada for a total of 127,468).

    I post this, not to start an "us vs. them" discussion. IBM India and the emerging markets will start to see some tremendous cuts in the coming years to make the 2015 earnings per share numbers. To gain the bottom line impact of releasing one US / European IBMer, the company will have to release 3 to 5 IBMers in the emerging markets. This will not be a good picture for any country.

    And if you still think of an IBMer as an IBMer whether they are in India, Russia, US, UK, Poland, Malaysia, Japan, China or elsewhere, their families will be impacted just like us in the U.S. Those will be sad days with 3 to 5 times the number of people and families affected as in the last 15 years. Pete.

  • CNBC: Big Blue has a cash flow problem: Analyst. By Justin Menza. Excerpts: While IBM was the second-largest software company after Microsoft last year, it has a fragmented business and it continues to lose market share to competitors like Microsoft, Oracle, SAP and Salesforce.com.

    IBM may also have a cash flow problem. The Credit Suisse analyst said investors should focus on IBM's 59 percent free cash flow conversion rate which has deteriorated every year since 2009 and now is the lowest in big-cap technology excluding Intel. ...

    Moreover, Garcha writes that IBM will have less flexibility to buy back its shares which "on average have accounted for 40 percent of EPS growth."

    Selected reader comments follow:

    • Really? The historic American company that off shored much of its workforce to the 3rd world, for SHORT TERM profit, is now struggling to stay relevant? Can the last person to have their job offshored at IBM please spray some air freshener on the rotting hallowed out carcass?
    • IBM: 1st world prices, 3rd world product! What could possibly go wrong?
    • The IBM C suite with a compliant BOD grants itself shares of options and grants of stock each year as a reward for their growth of EPS. When earnings remain flat or decline they then spend billions to buy back stock, increasing EPS by decreasing shares. Then they pocket the cash from their now profitable options.

      The new CEO alone has sold over $72M in stock and options in just 15 months. In the last two years IBM insiders have done the same to the tune of $1.9B according to reported insider sales data. Maybe it would be more efficient to just cut them a check!

      In April IBM said they would add $5B more to the stock repurchase plan and that they expected to authorize more stock repurchase in October.

      They get to mismanage the business and fleece the company.

  • Information Age: IBM fighting to hold on to $2bn megadeal with India's Airtel – report. India's largest mobile telco is reportedly looking to break up its giant IT outsourcing engagement with IBM when current contract runs out next year. by Pete Swabey. Excerpts: IBM is reportedly fighting to make sure Bharti Airtel, one of India's largest telecommunications providers, renews its $2 billion IT outsourcing contract when it expires next year.

    According to Indian business news site LiveMint, Airtel is looking to split the engagement, which covers network, desktop and application management, into smaller deals when the current contract runs out.

    The site claims that meeting Airtel's chairman Sunil Bharti Mittal was top of IBM CEO Ginni Rometty's agenda during a visit to India in July. ...

    It is IBM's biggest outsourcing contract in India, and the model for a number similar deals with telecommunications operators.

    Now, though, according to LiveMint's source, "the relationship is jaded". It is unlikely that IBM will be dropped altogether, but Airtel is keen to diversify its supplier list, the site claims.

  • Triangle Business Journal: How IBM may have lost a $107M contract because of turnover. By Lauren K. Ohnesorge. Excerpts: Could layoffs have caused a $60 million project overrun at IBM ?


    The computer services mammoth, thought to be the biggest employer at Research Triangle Park, is being dropped by the state of Pennsylvania after a 42-month project over-run.

    Pennsylvania was trying to modernize its unemployment compensation system, and had contracted with IBM in 2006 for an upgrade. The contract was initially set to cost $106.9 million, but funds dedicated are approaching $170 million. That contract isn’t being renewed. ...

    Pennsylvania commissioned a review of the project by Carnegie Mellon’s Software Engineering Institute, which identified a few issues. Among them? Turnover.

    SEI found that 638 different IBM employees have worked on the project, but most spent less than one year on the contract.

    “The churn of the workforce has likely impacted efficient project planning and execution,” the report reads, adding that both IBM’s project manager and executive left the project in early 2009 “during a critical time.”

  • 24/7 Wall Street: IBM Woes and Stock Decline May Be Only Just Starting. By Jon C. Ogg. Excerpts: International Business Machines Corp. is a very important stock to the broad stock market. It is worth some $210 billion, and it is the largest stock of the Dow Jones Industrial Average (DJIA) by far. The problem, on top of an analyst downgrade Tuesday, is that IBM’s growth is nonexistent. Management is allowing morale to suffer, and employee departures appear to be creating knowledge and talent vacuums in regional offices that drive sales. A short seller has become very aggressive here, and the stock price trouble for IBM could be just starting.

    Credit Suisse already had a cautious Neutral rating on IBM, but now its research department downgraded the stock rating to a very unattractive Underperform rating. The prior $200 price target was taken down to $175 in the call. To make matters worse, this IBM downgrade was not just a traditional analyst downgrade due to valuation. Credit Suisse had this as part of an Ideas Engine Series feature. The downgrade shows that future organic growth will be challenging. Kulbinder Garcha, the Credit Suisse analyst who made this downgrade, said:

    We are also concerned by deteriorating free cash flow and a less effective mix up to software revenue. We see relative and absolute downside to $175, even if the company achieves the 2015 $20 earnings per share roadmap target. ...

    IBM may screen out as a cheap stock to value investors on the surface, but that is just not the case after you dig through the numbers and consider the internal metrics hurting Big Blue’s business. This $20 earnings per share goal by 2015 will give IBM’s current price a value of less than 10 times forward earnings estimates, but that earnings growth is due to share buybacks and endless cost cutting. Analysts see a drop of 2% in sales for Big Blue in 2013, followed by only 2% sales growth expected in 2014.

    Prior to the short seller screen, we showed that IBM’s earnings cheer was overlooking that it simply has no real growth. In fact, its latest round of layoffs made us think that Milton from “Office Space” was running the show there. We even are disappointed with IBM’s dividend rate, and that was after it was raised.

  • Seeking Alpha: IBM: 5 Reasons To Sell? By Arsene Lupin. Excerpts: IBM is a great company. One of the few that made it through three eras of computing (Mainframe, PC and now Mobile). One that completely transformed itself from a pure hardware player in the 80's and 90's to a large sweet spot that has combined hardware, software and services. There aren't a lot of 'old tech' companies that can claim to have (almost) doubled the return of the S&P since the 2009 market crash. But all that is in the past. Is IBM's run over? Is IBM now a great company and an underperforming stock? I believe so, and present 5 reasons below to sell IBM?

    Selected reader comments follow:

    • You didn't mention the intangibles like employee morale which has gone into the toilet. Expenses, salaries and bonuses are all cut or are unfair to a few. Most are afraid of their job and the lack of cooperation is showing in products despite the R&D valid comment above. Most are hating to work there, which doesn't bode well for good future products
    • Morale is in my opinion the one thing that might threaten IBM in the long term. Outside of R&D, the happiness index lags Google, SalesForce, Microsoft, or SAP.

      Given the size of IBM, it's to be expected that as product lines die out, employees will be let go. Obviously this causes a degree of fear and uncertainty. It's compounded by IBM cutting benefits & perks. It doesn't help that executives are so highly compensated amidst all of this.

      But even with well paid employees, and there are many, IBM doesn't make it a complete experience. There needs to be a culture, a sense of inspirational identity. IBM needs to spend money on off-site team building activities, free meals & coffee, movies, etc. It need not cost a lot, but would go a long way in making innovative and top employees feel as if they have a mission. In conjunction with this, IBM needs to facilitate bottom up product innovation, cutting out middle management largesse...letting these employees have an impact...taking a cue from many Silicon Valley companies.

      One can argue that complaining about these extras is moot when one is paid well. Well, it matters when rivals can provide the whole package. IBM will keep losing talented software engineers to them, especially young ones who can best round out the look & feel of features.

      I absolutely believe IBM top management knows about this. They would have to be monumentally foolish to ignore the serious dissatisfaction of many employees. Mastery of finance and operations can only go so far. Even world class R&D won't save IBM in the long term if top software engineering & sales talent cannot be retained.

      Honestly, market factors don't bother me about IBM. For example, no company is more qualified to capitalize on the cloud than IBM. Again, the R&D is simply the best on the planet. IBM will produce seminal computer science. No, it's the employee cultural issues that looms as a threat to the future.

      That being said, I'm betting on IBM. I at least am looking for a good entry point. I believe management will get things right. My faith is rooted in 100 years of IBM history. I expect short term setbacks & volatility...but I also expect IBM to prosper another 100 years. As I said, management would have to be stupid to not solve morale issues...and I just don't think they are stupid.

    • 'Fundamentally IBM is run in a highly professional way and management is focused on their roadmap target to deliver at least 20.00 EPS in 2015.' I think this is IBM's main problem - the Street comes first before innovation. IBM has great R&D, but its mainly in the hardware tech where they seem to be getting out of the business - there focus is software and services. Now they are laying off the hardware sales people that should be out selling what R&D builds. Looks at IBM's products. What have they done in the last 3-5 years that's innovative? Anybody know where I can buy a Smart Planet?
  • Irish Times: Ex-IBM employee wins reprieve over contempt fine. Beata Schmid at centre of dispute with firm over claims she took confidential information. By Mary Carolan. Excerpts: A former employee with computer giant IBM, who faced being jailed today for not paying a €1,000 fine imposed for contempt of undertakings to hand over confidential information of the company, has secured a reprieve at the High Court.

    Beata Schmid, who previously alleged she discovered severe discrepancies in IBM’s sales records and has been dismissed pending appeal, was prepared to go to jail because she “quite simply” cannot pay the €1,000 fine imposed on her by the court last month, her counsel Rory Traynor told Mr Justice George Birmingham.

  • Breitbart: Corporate Welfare For IBM, Accenture at Heart of Senate Amnesty Bill. By Matthew Boyle. Excerpts: The Senate’s immigration bill contains a tech industry handout for some companies like IBM and Accenture. It would virtually eliminate competitors in the market for highly-skilled immigrant labor.

    Multiple sources close to the immigration debate have told Breitbart News that the provision is a key reason the corporate titans helped build support for passage of the immigration bill in the Senate. They fought hard to pass the law in the Senate and have been strategizing to get final passage in the House.

    At issue is an overlooked change to the H1B visa system, used primarily by technology companies seeking foreign scientific talent. Companies like Cognizant Solutions, based in New Jersey and Tata Consultancy, based in India, bring foreign engineers into the country on H1B visas and then contract out their services to small and medium sized businesses that need help with specific projects.

    Companies like these act almost like third-party human resources departments for businesses not big enough to recruit H1B talent from overseas in specific Science Technology Engineering and Mathematics (STEM) fields. As such, these companies are big competitors to IBM and Accenture, who also provide technology services, but with a different business model. Because some of these companies operating in the US are headquartered in India, the business press refers to them as "Indian IT Industry."

    The Senate passed amnesty bill, however, would change the law to prohibit an H1B visa being issued to an employee of a company that contracts out technology services to other businesses. Companies like Congnizant and Tata would have their entire business model prohibited by federal law. IBM and Accenture, who ironically do a significant amount of their services work overseas, would gain valuable business as a result. ...

    The Senate bill rips the current system apart to favor companies that use foreign labor to perform those same services for U.S. companies. For instance, IBM has a large workforce inside India that does most of these same services without bringing high-skilled immigrants to the United States to do those jobs here. So does Accenture, which has a headquarters in Ireland and a small U.S. presence. ...

    A July 23 study from J.P. Morgan’s Asia Pacific Equity Research arm concludes the same. “The immigration bill (passed by the Senate) puts IBM & Accenture (and perhaps other US firms) at disproportionate advantage vis-à-vis the Indian IT industry,” J.P. Morgan’s analysts wrote. “But these firms’ track-record of job creation in the US over a reasonable time-frame does not seem to square up with one of the bill’s noble intents.”

    A tech industry lobbyist told Breitbart News that IBM’s chief lobbyist Chris Padilla orchestrated this provision, and argued that the entire bill and immigration debate is built around this H1B language. Because it is such a boon for IBM, the lobbyist said, Padilla pushed the whole bill across the finish line in the Senate. The lobbyist who spoke with Breitbart News on condition of anonymity said Accenture, another tech company that would benefit from the legislation, helped IBM’s Padilla. ...

    As more evidence of IBM’s and Accenture’s critical involvement in getting the legislation passed, the lobbyist lays out those who win if the bill ever becomes law. “You got to look at the big winners of this bill,” the lobbyist said. “There are four huge winners. IBM, number one. Accenture, number two. Hewlett-Packard, number three. And the AFL-CIO, number four.”

  • Glassdoor IBM reviews. Selected reviews follow:
    • Good company to work for, but has its challenges” Senior Program Manager (Former Employee), Austin, TX. I worked at IBM full-time for more than 10 years. Pros: Working with very smart people. Very good benefits. Most jobs offer flexibility. Variety of things you can do throughout your career. Diversity. Ethical place to work. Cons: Extreme expense controls limit salary increases and other compensation. Starting salaries are not competitive. Very little opportunity for promotion. Long work hours. It often can be very stressful. Constantly expected to do more with less. Relentless focus on moving jobs to growth markets. Advice to Senior Management: The success of the company is going to greatly rely on the people who work there. That aspect seems to be ignored or relegated to the bottom of the priorities. Need to invest on the employees in the form of salary increases, retention and promotion. No, I would not recommend this company to a friend. I'm not optimistic about the outlook for this company.
    • Consulting experience is very valuable for employees. However senior manager needs to appreciate and reward employees.” Senior Managing Consultant (Current Employee), Piscataway, NJ. I have been working at IBM full-time for more than 10 years. Pros: Consulting opportunities; excellent networking opportunities. Cons: Poor pay; ineffective resource management. Advice to Senior Management: Get feedback from employees for their contribution and reward them appropriately. No, I would not recommend this company to a friend. I'm not optimistic about the outlook for this company.
    • Good place to build a strong foundation” Senior Managing Consultant (Current Employee). I have been working at IBM full-time for more than 10 years. Pros: Good learning opportunity. Options for lateral movement, especially from Business Consulting to Strategy/Ops roles in other divisions. Flexible working arrangement may be available for several roles. Cons: Employee development is uneven across divisions. For example, while Business Consulting may have better options for continuous learning, GTS has minimal budget for learning and employee development. Advice to Senior Management: In the war for talent, recruit and retain the best. Otherwise, talent may take flight just before they get to their prime years of giving back to the company. Yes, I would recommend this company to a friend.
    • Has declined a lot in the last few years” Information Architect (Current Employee), Calcutta (India). I have been working at IBM full-time for more than 7 years. Pros: Product-based company with lots of in-house products. Flexible work hours. Pays well at onsite. Cons: HR almost non-existent. Promotion process has been made unnecessarily complicated. Very less annual hikes. Yes, I would recommend this company to a friend. I'm not optimistic about the outlook for this company.
    • IBM is a huge company, sometimes the little people get mistreated.” Applications Programming Specialist (Former Employee), East Lansing, MI. I worked at IBM full-time for less than a year. Pros: Lots of experience around, lots of internal resources, good insight into the corporate world, great experience for college graduates just breaking into the industry. Cons: Hired in for one thing but ended up doing something completely different; pay is low compared to other companies; management is lackluster. Advice to Senior Management: Management needs to be better in general. Most of the projects I was on, the leadership was sub par. Bad project management leads to unhappy people, and that leads to low quality work from people. Your leaders say they care about you and your "career development" but in the end they only think of you as a resource. Management: Give your employees (not resources) more attention; check up on them; ask them how's it going from time to time; be more proactive rather than reactive, and explain in the interview process what a potential candidate will actually end up doing.
    • IBM has stopped caring about employees” Advisory Software Engineer (Current Employee), Research Triangle Park, NC. I have been working at IBM full-time for more than 10 years. Pros: Salary and vacation are good. Work/life balance fine as long as you realize you don't get rewarded for working extra hours or penalized for just putting in 40. Cons: Corporate is doing everything they can to alienate top talent. Over the past several years they've taken away raises for top performers, reduced bonuses, taken away the pension, changed 401k plan and employee stock purchase plan, canceled most company outings/lunches, reduced site maintenance including trash pick up, taken away office supplies, and gotten rid of the free water. Advice to Senior Management: Senior management is doing a great job of making themselves rich. No, I would not recommend this company to a friend. I'm not optimistic about the outlook for this company.
    • Driving it into the ground” Staff Hardware Engineer (Former Employee), Austin, TX. I worked at IBM full-time for more than 8 years. Pros: Quality of coworkers. Some really great people still work there.(but probably not for long.) Cons: Management is totally focused on financial engineering instead of product engineering. This has led to poor/non-existent morale and high quality employees leaving in droves. Development team is a shell of its former self. Probably too damaged to be repaired at this point. IBM can only be considered a last resort employer. Advice to Senior Management: They don't listen, so this is a waste of time. Too busy counting the bonus money while Rome burns around them. No, I would not recommend this company to a friend. I'm not optimistic about the outlook for this company.
    • Company with great legacy & culture” Sales Representative (Former Employee), New York, NY. I worked at IBM full-time for more than a year. Pros: Smart people; well-organized management system; clear role and responsibility. Cons: Rigid atmosphere; limited room for creative problem solving. Advice to Senior Management: Develop the system to make smart people can think out of box and speak.
    • Politics, Old school hierarchy. Depends on your luck on projects.” Senior Consultant (Current Employee), New York, NY. I have been working at IBM full-time for more than 3 years. Pros: Some great mentors. The name of the company. Solid foundation. Cons: Politics, politics, politics. Hierarchical. Crappy projects are really crappy. Low pay with joke of a raise every year (if you even get one). Advice to Senior Management: Treat us with respect, after all we are the reason why you are getting a big bonus. No, I would not recommend this company to a friend. I'm not optimistic about the outlook for this company.
    • Career push and technical computer skills constant learning opportunity.” Software Engineer (Former Employee), Kirkland, WA. I worked at IBM full-time for more than 10 years. Pros: Strive to climb career ladder. Self learner. Constant need to learn and be busy. Cons: Huge corporate structure. Continual yearly job cuts. Daily job tools not latest software used outside of IBM. Advice to Senior Management: Cut more of upper high end mgmt positions &/or salaries so you can keep lower positions that actually do all the work. No, I would not recommend this company to a friend.
    • Great company to work for! very flexible” Anonymous Employee (Former Employee). Pros: Very flexible timings. Free environment. Cons: People are workaholic. And no free snacks! Advice to Senior Management: Please provide at least tea and coffee for free! No one is going to parcel it to home!
    • Outsourced to IBM” Anonymous Employee (Former Employee). I worked at IBM full-time for more than 10 years. Pros: Was able to keep accrued vacation. IBM supports community involvement and leaders in trying to help make the world a better place. Cons: No more pension benefits. IBM-supported training as long as it was free or the employee paid for it. Being outsourced to IBM is like being in a little bubble that is loosely attached to the core company, but I never felt like I was ever integrated into the core company. The outsourcing contracts were reduced and cut until almost nothing was left. If a serious problem came up, experts from the core company showed up to fix and repair the relationship with the client, but then they left again leaving only the illusion that everything was under control until the client complained again. Advice to Senior Management: Take advantage of quality people by developing skills. To refresh vitality and innovation, provide opportunities for employee movement within the company. People are the life blood of a company that make the company what it is; they are not resources like chairs that are just bought and sold to increase profit and reduce costs when needed.
    • Sr. Product Manager” Senior Product Manager (Former Employee), Raleigh, NC. I worked at IBM full-time for more than 10 years. Pros: Global market presence; well-structured process; matrix organization; amazing reach into enterprise customers; great sales coverage; general camaraderie of being an IBMer; work-from-home option. Cons: Not competitive salary; manically focused on Wall Street and is missing the big picture; not able to map to new market trends and probably missing out; current business models not aligned with changing market landscape; hard to grow and get promoted; have not seen any new blood in the recent past; top-heavy management that feels that they can grow by cutting lower ranks. Advice to Senior Management: Massive financial engineering is not a cure-all for the mismatch in business models and changing market place. The general perception is that relentless cuts will save the company for future growth. However, it is having a devastating effect on employee morale. I encourage the management to look beyond an artificially-set revenue growth plan and look at market-changing innovations that made IBM great. No, I would not recommend this company to a friend. I'm not optimistic about the outlook for this company.
    • Very disappointing culture is all based on EPS and that is all. If you want to leave leave. They don't care.” Anonymous Employee (Current Employee). I have been working at IBM full-time for more than 10 years. Pros: Allowed to work from home. Ability to work any hours wanted as long as work is done. Cons: Isolated, alone and no opportunity for growth or pay increase. US employees are the bottom of the barrel. Abuse of employees' work balance. Asked to take calls around the clock to allow for discussions with outsourced jobs in those locations. Advice to Senior Management: Take care of your employees. If they are happy you will be happy and rewarded with more work from them. No, I would not recommend this company to a friend. I'm not optimistic about the outlook for this company.
    • Potentially Great Environment” Software Engineer (Current Employee), Lenexa, KS. I have been working at IBM full-time for more than 7 years. Pros: Work with some of the best people in the world; opportunities to work on interesting technologies. Cons: Easy to get lost in the machine. Advice to Senior Management: There are many ways to measure success other than dollars earned Yes, I would recommend this company to a friend.
    • Not much in terms of career growth” Advisory Software Engineer (Current Employee), Austin, TX. I have been working at IBM full-time for more than 10 years. Pros: Very smart and dedicated group of professionals. Good teamwork especially among US employees. In spite of all uncertainties, most people have a strong sense of loyalty to the company and its clients. Cons: Lack of career opportunities; One seems to get a lack of direction within the company and there seems to be a lack of vision on the part of management. Advice to Senior Management: Bring back the innovation and forward thinking that IBM used to be known for. No, I would not recommend this company to a friend. I'm not optimistic about the outlook for this company.
    • Good engineers—good people—horrible executives sucking the money out of the company with no vision for the future.” Validation Engineer (Former Employee), Austin, TX. I worked at IBM full-time for more than 7 years. Pros: I would not advise anyone to work here out of college—dead end job. Cons: High turnover will use young engineers until they're bitter and disgruntled. Advice to Senior Management: Find another line of work. Get some real technical people with a real vision for the company. You're ruining this company trying to drive up EPS with false earning reports based on outsourcing and increased bottom line based on saved capital due to completely ripping off your employees. Coming from a military veteran, self made engineer—get a grip. No, I would not recommend this company to a friend. I'm not optimistic about the outlook for this company.
    • Never join IBM” Senior Software Engineer (Current Employee), Mumbai (India). I have been working at IBM full-time for less than a year. Pros: None. JOIN IBM IF YOU WANT TO SPOIL YOUR CAREER, WORK-LIFE BALANCE & WANT TO EARN PEANUTS WHICH THEY OFFER AS SALARY. Cons: Political management. Cheats employees while onboarding by hiding ctc; location; growth; opportunities; treats employee as resource/revenue generating machine; no work-life balance. You will be trapped by management. IBM—Please remove your work life balance slogans from your websites right now. No transport. Pathetic Intranet speed which hampers work & employees are pinpointed for not doing work on time even though they do not effort to have even 1 mbps line! No lights—sometimes during work may be due to load shading in village (office is as isolated place in Navi Mumbai); Poor food quality. Never recommend this worst company with worst management to your friends. Advice to Senior Management: Leave IBM & join politics—you can do wonders in that field & improve country's economy. No, I would not recommend this company to a friend. I'm not optimistic about the outlook for this company.
    • I had a great time working for IBM, Shame on top management” Sales Specialist (Former Employee), Toronto, ON (Canada). I worked at IBM full-time for more than 3 years. Pros: Great team and people, working from home, nice salary, average benefits, corporate cellphone, good trainings and education, many company discounts. Cons: Poor top level management, greedy company, doesn't care about the employees, you can be out of job at any time, doesn't matter if you are the best employee or an average, they only care about the way Wall Street look at them. Advice to Senior Management: Need new CEO. No, I would not recommend this company to a friend. I'm not optimistic about the outlook for this company.
    • Not contractor friendly” Anonymous Employee (Current Employee). I have been working at IBM as a contractor. Pros: I have a job and can pay my rent. Cons: Use contractors to their advantage. Reduces their hours if quarterly numbers are not met. Advice to Senior Management: Ask good people if they have aspirations for a career. Possibly invest in those people a little for a positive return. No, I would not recommend this company to a friend.
    • A sales driven organization with constant change in performance metrics” Practice Lead (Former Employee), Sydney (Australia). I worked at IBM full-time for more than 7 years. Pros: Brand name, enhances CV and employability, excellent pre-sales and sales support. Cons: "Dead woods" in senior management rank claiming sales/revenue credits not attributable to them, unhealthy focus on quarterly performance increases risk of alienating long-term clients, managers are promoted to their level of incompetence, complete lack of work/life balance, doesn't promote ethnic diversity in Australia/NZ. Advice to Senior Management: Implement performance management metrics that reward sales/delivery personnel at the coal face. Pro-active monitoring of adherence to ethnic diversity policy in Australia/NZ. No, I would not recommend this company to a friend. I'm not optimistic about the outlook for this company.
    • No longer a good place to work” Senior Project Manager (Former Employee), Research Triangle Park, NC. I worked at IBM full-time for more than 10 years. Pros: Great people, solid pay and decent benefits. Cons: No job stability, quarterly under-the-table layoffs, 401k match removed until end of year if you are still there...run, don't walk. Advice to Senior Management: Buying companies does not replace invention and product leadership. No, I would not recommend this company to a friend. I'm not optimistic about the outlook for this company.
    • Variable over time and between business units” Executive IT Specialist (Former Employee). I worked at IBM full-time for more than 10 years. Pros: * Smart people; * Unmatched credibility with customers when wearing an IBM badge; * Benefits package for right candidates. Cons: * Enormous inertia to change, even when existing processes are failing; * Mental and physical separation between sales and non-sales teams; * No meaningful priority given to employees; * Indiscriminate, desperate offshoring to keep primary costs low means service quality is declining constantly. Advice to Senior Management: Ask customers what they want. Humbly solicit vies as to the experience of being an IBM customer. It will open IBM managements eyes. No, I would not recommend this company to a friend. I'm not optimistic about the outlook for this company.
    • Diversity? No Thanks” Human Resources (Current Employee), Armonk, NY. I have been working at IBM full-time for more than a year. Pros: May have an opportunity to be relocated to China before your position is outsourced to a growth nation leaving you no way to get home. Cons: The company is not interested in diversifying its workforce. Too much focus on moving jobs out of the United States to low cost labor and low skilled labor. Company is forcing too much pressure on employees to meet unrealistic revenue objectives which will end up in numerous ethical issues making front page news on a regular basis once the regulators figure out what they are doing. Advice to Senior Management: Give up on the 2015 roadmap to disaster. No, I would not recommend this company to a friend. I'm not optimistic about the outlook for this company.
    • Great opportunities for students, typical big tech grind for everyone else” Software Engineer (Former Employee). I worked at IBM as an intern. Pros: The company is huge and has its fingers in nearly every slice of the technology pie, so you will never run out of interesting things to check out. Lots of huge-client and government projects come through, so you get real experience in an enterprise setting. Locations all over the world. Starting pay is usually pretty good, but there is rarely room for it to go up. Cons: The full time employees seemed unhappy and overworked. It was heartbreaking to see my boss, who earlier in his career was the lead architect of an extremely successful business software product, frequently coming in visibly ill from endless security audits and staying up all night supporting teams in other time zones. Advice to Senior Management: Flatten your organizational structure and put technical people in charge of infrastructure policy. Yes, I would recommend this company to a friend.
    • Average Large Company” Hardware Quality Engineer (Former Employee), Essex Junction, VT. I worked at IBM full-time for more than a year. Pros: Good time off right off the bat; competitive starting salary; flexible hours and opportunities to work from home. Cons: As with every large company, bureaucracy is the biggest issue; raises and bonuses rare and smaller percentages than competitors; hard to move around to different sites or divisions; company culture is such that work-life balance is now "work-life integration" and people are always checking email and working not only late into evenings, but on weekends and time off, too. No, I would not recommend this company to a friend. I'm not optimistic about the outlook for this company.
    • IBM” Advisory Software Engineer (Current Employee), East Lansing, MI. I have been working at IBM full-time for more than 3 years. Pros: Flexibility and sense of belonging to a great company with a long history of innovation. Compensation that is above industry standards. The people are dedicated and top notch professionals. Cons: I cannot think of a single con. Advice to Senior Management: Keep up the great work and continue to expect the best from each and every IBM and do except anything less than perfection. Yes, I would recommend this company to a friend; I'm optimistic about the outlook for this company.
  • Glassdoor IBM Canada reviews
  • AlterNet: The Great American Do-It-Yourself Retirement Fraud, Brought to You By Big Finance & Co. A train wreck for you is a gravy train for financial hustlers and their media mouthpieces. By Helaine Olen. Excerpts: “For retirement, the answer is 4-0-1-k,” proclaimed Tyler Mathisen, then editor of Money magazine in 1996. “I feel sure that someday, like a financial Little-Engine-That-Could, it will pull me over the million-dollar mountain all by itself.”

    For this sentiment, and others like it, Mathisen was soon rewarded with an on-air position at financial news network CNBC, where he remains to this day. As for the rest of us? We were had.

    The United States is on the verge of a retirement crisis. For the first time in living memory, it seems likely that living standards for those over the age of 65 will begin to decline as compared to those who came before them—and that’s without taking into account the possibility that Social Security benefits will be cut at some point in the future.

    The culprit? That same thing Mathisen celebrated: the 401(k), along with the other instruments of do-it-yourself retirement. Not only did they not make us millionaires as self-appointed pundits like Mathisen promised, they left very many of us with very little at all.

    You might be tempted to ask “what went wrong,” but a better question might be “why did we ever expect this to work at all?” It’s not, after all, like we weren’t warned. As early as 1986, only a few years after the widespread debut of the 401(k) and the idea that American workers should self-fund their own retirement accounts based on savings and stock market gains, Karen Ferguson who was then, as she is now, the head of the Pension Rights Center, warned in an op-ed published in the New York Times, “Rank-and-file workers have nothing to spare from their paychecks to put into a voluntary plan.”

    But her voice, and that of other critics like economist Teresa Ghilarducci, who is now at the New School and described our upcoming retirement crisis as “an abyss” in 1994 congressional hearings, were drowned out by the money and power of the financial services industry, combined with their enablers in the personal finance media who proclaim even today that if we don’t have enough money set aside for retirement, it is all our own fault. ...

    Yet whether the stock market goes up, down or sideways, the financial services sector makes out when it comes to your retirement accounts. How much do they earn? Astonishingly, we don’t know the answer. In 2008, Bloomberg magazine polled a group of pension consultants and came to the conclusion that 401(k) fees alone totaled $89.1 billion annually. Ghilarducci, who recently took a more all-encompassing look at American retirement assets, and included IRAs and pensions in her total, pegged the number at $500 billion.

  • New York Times: Rewriting the Rules on Retirement; How 401(k)'S Hurt Lower-Paid Workers. By Karen W. Ferguson. (April 27, 1986). Excerpts: There is a quick way for the Senate Finance Committee to raise billions of dollars in tax revenue: End the popular middle-income tax shelter known as the 401(k) plan.

    This voluntary-savings arrangement has exhibited a remarkable resiliency in Congress. Scheduled for elimination in last fall's Treasury proposal for tax revision, the plans survived in the House tax reform bill with a proposed cap on employee contributions of $7,000. Then the Senate Finance Committee voted earlier this month to raise that limit to $12,000, ignoring the acid observation of its chairman, Bob Packwood, Republican of Oregon, that the ''tax code is not designed to let the elegant live very exquisitely when they retire.'' ...

    Thus far, 401(k)'s have escaped criticism, primarily because they fit in perfectly with traditional notions of self-reliance and rugged individualism. But these notions are likely to be very rugged for most lower-paid and moderate-income workers.

    This is because the shift toward do-it-yourself retirement arrangements is a shift away from company-paid pension plans. Employers are using 401(k)'s as a convenient substitute for pension plan improvements.

    Money that would have gone into pension plans a few years ago, to make plan rules fairer or to increase benefits, is now going into 401(k)'s. Some smaller companies have found 401(k)'s to be such an appealing escape route that they have jettisoned their pension plans entirely. The appeal, simply, is that the companies put money in only if the employee contributes. Under a pension plan, the company contributes whether the employee contributes or not.

New on the Alliance@IBM Site
  • Job cuts have begun. So Far in North America:
    • BT/IT CIO Enterprise Transformation: 4
    • Corporate Marketing and Communication: 83
    • GBS AMS Commercial Delivery: 27
    • GBS AMS IBM Global Account: 123
    • GBS CS Financial Services Sector: 14
    • GBS CS Industrial Sector: 32
    • GBS PS Business Analytics: 39
    • GPS Solutions and Delivery: 116
    • IBM S&D Communications Sector: 3
    • ISC Engineering: 75
    • ISC Sales Transaction Support OIST: 70
    • Research: 65
    • S&D Global Techline and Channel Technical Sales: 9
    • SO Delivery HQ Cloud Development and Delivery: 40
    • SO Delivery Integrated Competencies: 46
    • SO sectors (GSSR): 31
    • Software Group Collaboration: 115
    • Software Group East Region Sales: 40
    • Software Group Industry Solutions: 126
    • Software Group Information Management: 137
    • Software Group Marketing: 222
    • Software Group NA Software Sales: 63
    • Software Group Rational: 59
    • Software Group Security: 22
    • Software Group Tivoli: 98
    • Software Group WW Services and Education: 22
    • STG Advanced Microelectronics Solutions: 114
    • STG Burlington Semiconductor MFG and Development: 93
    • STG Burlington Site Operations: 8
    • STG Cloud Systems SW Development: 70
    • STG Competitive Lab and Technical Sales Centers: 35
    • STG Electronic Design Automation: 106
    • STG High Speed links, Cores and Memory: 67
    • STG IBM I Development: 60
    • STG ISV Global Support: 35
    • STG Lab Services and Tech Training: 52
    • STG Operations and Transformation: 34
    • STG Power Software Development: 64
    • STG Pureflex & System X Software Development: 32
    • STG Semiconductor Research and Dev: 165
    • STG Server & Storage Engineering System Test: 97
    • STG SSE Intellectual Property: 64
    • STG Storage (ISSA): 41
    • STG Storage Systems Development: 121
    • STG Strategic Initiatives: 8
    • STG System Z Software Development: 45
    • STG Systems Solutions Dev: 56
    • STG Systems Technology Development: 24
    • STG Test Site Design: 59
    • STG Worldwide Client Care: 30
    • STG WW STG Tech Support: 65
    • SWG Application and Integration Middleware: 86
    • Total cut so far: 3312
  • Job Cut Reports
    • Comment 08/04/13: Seems obvious, from causal trending, that [at least one] major cut[s] will still happen at/around Q4. For the last decade-plus, IBM has performed their annual "spring cleanup" -- pruning some percentage of workers immediately before committing to March bonus -- the no-401(k)-match-till-15-December policy makes it clear that a similar maneuver will be executed on or before 14 December. Happy holidays! -SimpleMath-
    • Comment 08/04/13: I have been reading "The Great Deformation" by David Stockman: http://www.amazon.com/The-Great-Deformation-Corruption-Capitalism/dp/1586489127 It discusses what IBM has been doing with its stock buyback (encouraged by lower cap gains than ordinary income rate).
      "Upon closer examination, in fact, IBM was not the born-again growth machine trumpeted by the mob of Wall Street momo traders. It was actually a stock buyback contraption on steroids. During the five years ending in fiscal 2011, the company spent a staggering $67 billion repurchasing its own shares, a figure that was equal to 100 percent of its net income."

      The author points out that the gain in IBM stock price is mainly due to stock buybacks, acquisitions, and the decline of the dollar. You'll be happy to note that some of the share buybacks have (of course) been plowed into executive option programs. So, in case there was any doubt, the execs will do fine even though the company really isn't. -Anonymous-

    • Comment 08/05/13: Seen and heard many offices around the world reducing trash cans. I really want to meet these morons who decide on such cost cutting measures. What are they thinking? What next? Pay for breathing air conditioned air? -Trashy-
    • Comment 08/05/13: "Almaden Research Center has removed office trash cans". Just drop all litter right outside your manager's door. Maybe he/she will get the message, and then again, maybe not! Let us know when the confidential waste bin(s) disappears -IBM_basura-
    • Comment 08/05/13: I was on the call today at 3 PM EDT. I knew something was up because the exec was 20 minutes late to joining the call. Telephone operators individually granted access; strong business controls on access to call. Bottom line: 50%+ of US STG/ISC furloughed one week. Regular employees get 33% of salary for the week. Execs 0% of salary. Choice of furlough: last week of August or first week of September. If you pick the first week of September, you get to take Labor Day as a personal choice holiday later in the year at a time of your choosing. Questioners on the call sounded very discouraged and disappointed in IBM. -ISC@RTP-
    • Comment 08/05/13: Really? Now we have mandatory time off with reduced (no) pay? Our competitors know what's going on too...I work in services, and 2 of my friends (top technical talent) got unsolicited offers from competitors...one of them is taking it and leaving. Not sure how much longer I'm gonna subject myself to this.. -FedUp and Moving On-
    • Comment 08/05/13: Response to Q&A on Furlough call today: STG and ISC divisions currently impacted. "No other divisions at this time, but we cannot speculate on the future". Also "we cannot speculate on whether or not this would be done again in the future". Looks like IBM is trying to win the war by shooting its own troops. -Furloughed-
    • Comment 08/06/13: The modern version of "Let them eat cake" is "we gave them paid time off, what more do they want"."Let them eat cake" is the traditional translation of the French phrase "Qu'ils mangent de la brioche", supposedly spoken by "a great princess" upon learning that the peasants had no bread. Since brioche was enriched with butter and eggs, as opposed to ordinary bread, the quote supposedly would reflect the princess's obliviousness as to the condition of the people. Our ruling class inside IBM is oblivious to the wants, needs, and desires of their workers. -Anonymous-
    • Comment 08/06/13: Only took years of things being taken away to final look in to this. Now I get to figure out what week to take off and how to come up with the mortgage. No ones fault but my own -late to the party-
    • Comment 08/06/13: Businesses and government agencies operating under budget constraints sometimes use furloughs to place workers on temporary unpaid leave without terminating their employment. Some employers regularly place seasonal workers on furlough, as is often the case with construction workers. You may be eligible for unemployment insurance as a furloughed worker, but receiving the benefits depends on correct and timely filing of claims and compliance with labor laws that determine what constitutes a legitimate furlough. Jam your state's Unemployment office with claims if you are eligible. Don't let this beast win! -Sorry_Furlough_People-
    • Comment 08/06/13: OK..now they are taking food directly off of your table. Is it time YET to organize? Going to wait until the very end?...at which time it will be too late. -Organ_Eyes-
    • Comment 08/06/13: Just talked to my unemployment office after being RAd to figure out why my claim has been not moving. Not only will Big Blue not respond to them to confirm how my unemployment was given (little effort for them, big difference in when I start getting unemployment) I was told they had reported my wages being over 15 grand lower than they actually were. While this doesn't change the amount I am given each week by unemployment, it certainly changes what IBM has to claim on their tax forms. Sickened by how underhanded this company is and how little care is given to employees. We get screwed on both sides. -Anon-
    • Comment 08/06/13: If you are a W-2 IBM contractor and are furloughed more than one consecutive week of work (e.g. one week and one day), file for UI. You may even get one day of UI benefits or at least get your "elimination, unpaid UI week" credit. In many US states you are qualified to received benefits since you are an "at will" of IBM contractor and "no work = no pay and no benefits" W-2 employee. -Advice-
    • Comment 08/06/13: Just went to check on my UI claim for this week. It was suspended because of questions about eligibility. My guess is, since my manager was SO adamant that I "retired", even though I kept TELLING her I did NOT retire,that is what IBM is telling the Unemployment office. Lucky for me that I was able to print the "you have been identified for a permanent layoff" email from my manager. I'm glad I figured out how to get it to print. Whew! -AlmostRelieved (now very relieved)- Alliance reply: Always appeal if you are denied unemployment.
    • Comment 08/06/13: I quit IBM several years ago out of disgust and the way IBM treated their employees. Now I am contacted by a recruiter about relocating to IBM China, in Shanghai, China to be a Technical Specialist. This will include signing bonus, living expenses, plus salary for doing what I did at IBM but in China. Not only does IBM want to fire you employees that are left, but they want you to move to China ! I never thought I would see such low handed tactics, but that is what IBM has become. -IBM_Dan-
    • Comment 08/06/13: Employee morale continues to plunge in to the abyss, in to never before seen depths. Road Kill Map 2015 will be the ruin of this once great company. Glad to have gotten the hook this past RA, and moved on to the health industry, EE degree in tow. Good luck to all of you left to shoulder the burden of management's poor decisions. -NW VT Woodchuck-
    • Comment 08/06/13: All postage meters have now been eliminated at IBM offices across the US. Employees are no longer able to mail letters at IBM. They now must either overnight them or pay the postage themselves. Searching for the bottom and getting close.. -Really??--Seriously??-
    • Comment 08/07/13: I just got RAed. NY State DOL sent me a job possibility working for IBM as a temp. The State of NY says my resume fits the job qualifications. Sure they do! Been doing that job before the RA ax for a decade. And IBM says NY and USA workers are not qualified for the jobs so it gives them impetus to RA and offshore them. What a joke! Maybe NY State should drag in IBM HR and management and ask for their employment plan. Bring them into Department of Labor and Human Resources and ask them why they let go or are letting go 697 FULL TIME positions; which folks the State sees, as qualified for these TEMP positions! I am not going to be a beastie or lackey for IBM! Temporary employment...R U serious? That will help IBM keep their PILOT, make more obscene profits, and make Dutchess unemployment numbers appear better. LOL -temp_this!-
    • Comment 08/07/13: Are NY IBMers eligible for any NYS Unemployment benefits due to this STG furlough? -anon- Alliance reply: See furlough comments link http://www.endicottalliance.org/furloughpaycut.php
    • Comment 08/07/13: Ummm Ginni, remember your video rant at employees after Q1 where you wanted 24 hr response for customers? How does that fit with telling employees required to do such to take a hike for a week? What are we supposed to tell customers "Sorry level 2 is on furlough, you'll have to wait?" Hope you plan on being around for some calls from pissed off CIO's -Longtimer-
    • Send the RA pack to ibmunionalliance@gmail.com so we can validate and count the number of workers fired. Names are confidential.
News and Opinion Concerning Health Savings Accounts, Medical Costs and Health Care Reform
  • Huffington Post: Obama: Republicans' 'Unifying Principle' Is Denying Health Care To 30 Million People. By Jennifer Bendery. Excerpts: President Barack Obama on Friday slammed Republicans for their continuing push to repeal his signature health care law, asking why the primary issue uniting the GOP involves kicking tens of tens of millions of people off of health insurance with no alternative plan for providing them coverage. ...

    "The one unifying principle in the Republican Party at the moment is making sure that 30 million people don't have health care," Obama said, referring to the number of people who will have health insurance as a direct result of the law. "Why is it that my friends in the other party have made the idea of preventing these people from getting health care their holy grail? Their number one priority?"

    The president chuckled as he said Republicans at least used to say they would replace the law with a better health care proposal. Not anymore, he said.

    "There's not even a pretense now that they're going to replace it with something better," Obama said. "The notion is simply that those 30 million people, or the 150 million who are benefiting from other aspects of affordable care, will be better off without it. That's their assertion. Not backed by fact. Not backed by any evidence. It's just become an ideological fixation."

  • Washington Post: Do you understand health insurance? Most people don’t. By Sarah Kliff. Excerpts: A little while back, a health-care economist at Carnegie Mellon University rounded up 202 people who had employer-sponsored health insurance. And, he gave them this quiz: Define four basic health insurance terms. It’s right here, for you, dear reader, to take.

    Most people who George Loewenstein, the health-care economist, studied could get one or so questions right – and thought they had pretty decent comprehension of how health coverage works. But only 14 percent could identify what each of the four terms mean (answers, if you’re curious, are at the very bottom). ...

    And when Loewenstein gave his study participants a hypothetical insurance plan, and asked them to figure out what a four-day hospital visit would cost, 11 percent were able to figure out the price. Just 14 percent were within $1,000 of the right answer.

    Only 14 percent answered four multiple choice question about the four most basic insurance features. The respondents to the survey were a representative sample of people who had an insurance policy and were the primary or secondary stakeholders. Involved in making decisions about the insurance plan.

    “I have a PhD in economics and I’ve spent a bunch of time giving insurance companies feedback about policies, and I still find them difficult to understand,” Loewenstein said. “I assumed that extrapolating from myself that the average American individual would have an even lower understanding.”

    Selected reader comments follow:

    • I wonder what Canadians, Europeans and even people living in Hong Kong and Singapore have to know to get health care.
    • I can answer from the Canadian perspective: basically, nothing. You fill out a one page form (name, address, proof of residency, etc.) and you get a picture ID. You show this to the person at the counter at the medical facility. I also know that if you go to clinic without a card, they may charge you $60 and apologize endlessly about how horrible they feel asking for money just to see a doctor.

      And as hard as it is for people who have grown up with our system to understand, it's even worse for people unfamiliar with it. My wife, despite being incredibly bright, couldn't make heads or tails of her company's policy when she first moved here.

      One well-known result in economics theory is that the more confusing a product or service is, the more profit a company can make. Not-for-profit insurance providers have to incentive for complexity, but for-profit ones do.

      The most skilled are the companies that can pull off the creation of confusion and sell the confusing mix of details to you as the prospect of choice and customization so it sounds like a good thing.

    • Judging by the number of intelligent comments citing different details, there is not a single correct answer to all of these questions. This is not by accident. Obfuscation is part of the insurer's game plan.

      Health insurance policies are designed for one thing: To maximize profit and minimize the treatment provided. Even the "non-profits" follow this model. Remember the testimony in Congress a few years ago, where the lady's coverage of cancer treatments was stopped because she hadn't mentioned her acne on the application? It's not that uncommon.

      California fined Anthem Blue Cross and Health Net $14M each, for dropping people when they needed expensive treatment. Their policies were full of fine print that would allow them to drop the insured for no logical (medical) reason--a technicality.

    • I think a better headline would be "Do you understand health insurance *terminology*? Most people don't." I think if you asked people to describe to you in their own words how insurance works, they'd demonstrate an understanding of many of the concepts described here. But show me a person who uses the term "coinsurance" in their daily life, and I'll show you someone who's either a salaried employee of an insurance company, or the family member of someone with a chronic illness.
  • U.S. News & World Report: How Obamacare Will Affect Health Insurance Rates by Age Group. By Philip Moeller. Excerpts: One of the greatest health hazards of growing older has long been losing access to health insurance before reaching age 65 and qualifying for Medicare. Beginning next year, this will change under Obamacare. Beyond knowing there will be big changes, it is very challenging to figure out what the world of health insurance will look like for baby boomers who are not yet old enough to qualify for Medicare coverage.

    Employer group policies do guarantee coverage for older applicants. For individual applicants outside the employer group market, however, the story has been much different. In most states, insurers have been allowed to reject applicants with pre-existing medical conditions. Even if they did agree to write a policy for an older applicant, they have had the freedom to charge rates many times higher than the premiums for comparable coverage charged to younger and healthier applicants.

    But under health care reform, conditions in the non-group market for individual and family policies are set to change next year. No applicant can be turned down for health insurance due to a pre-existing condition or for any other reason. Insurers can still charge higher rates to older individual policyholders, but the ratios, or "bands," by which age-based rates can differ have been reduced to 3:1 (charging an adult age 64 years or older more than three times the premium they charge a 21-year-old for the same policy) from 5:1 under existing practices. ...

    Under Obamacare, it will be the younger generations' participation that helps make coverage affordable for everyone else. Younger people tend to have very low insurance claims, which explains why so many of them forgo insurance entirely. If too many of them continue to avoid buying insurance, then the rates charged to individual older Americans will need to rise in 2015 and perhaps beyond.

  • New York Times: In Need of a New Hip, but Priced Out of the U.S. By Elisabeth Rosenthal. Excerpts: Michael Shopenn’s artificial hip was made by a company based in this remote town, a global center of joint manufacturing. But he had to fly to Europe to have it installed.

    Mr. Shopenn, 67, an architectural photographer and avid snowboarder, had been in such pain from arthritis that he could not stand long enough to make coffee, let alone work. He had health insurance, but it would not cover a joint replacement because his degenerative disease was related to an old sports injury, thus considered a pre-existing condition.

    Desperate to find an affordable solution, he reached out to a sailing buddy with friends at a medical device manufacturer, which arranged to provide his local hospital with an implant at what was described as the “list price” of $13,000, with no markup. But when the hospital’s finance office estimated that the hospital charges would run another $65,000, not including the surgeon’s fee, he knew he had to think outside the box, and outside the country.

    “That was a third of my savings at the time,” Mr. Shopenn said recently from the living room of his condo in Boulder, Colo. “It wasn’t happening.”

    “Very leery” of going to a developing country like India or Thailand, which both draw so-called medical tourists, he ultimately chose to have his hip replaced in 2007 at a private hospital outside Brussels for $13,660. That price included not only a hip joint, made by Warsaw-based Zimmer Holdings, but also all doctors’ fees, operating room charges, crutches, medicine, a hospital room for five days, a week in rehab and a round-trip ticket from America.

    “We have the most expensive health care in the world, but it doesn’t necessarily mean it’s the best,” Mr. Shopenn said. “I’m kind of the poster child for that.”

    As the United States struggles to rein in its growing $2.7 trillion health care bill, the cost of medical devices like joint implants, pacemakers and artificial urinary valves offers a cautionary tale. Like many medical products or procedures, they cost far more in the United States than in many other developed countries. ...

    An artificial hip, however, costs only about $350 to manufacture in the United States, according to Dr. Blair Rhode, an orthopedist and entrepreneur whose company is developing generic implants. In Asia, it costs about $150, though some quality control issues could arise there, he said.

    So why are implant list prices so high, and rising by more than 5 percent a year? In the United States, nearly all hip and knee implants — sterilized pieces of tooled metal, plastic or ceramics — are made by five companies, which some economists describe as a cartel. Manufacturers tweak old models and patent the changes as new products, with ever-bigger price tags.

    Generic or foreign-made joint implants have been kept out of the United States by trade policy, patents and an expensive Food and Drug Administration approval process that deters start-ups from entering the market. The “companies defend this turf ferociously,” said Dr. Peter M. Cram, a physician at the University of Iowa medical school who studies the costs of health care. ...

    The basic design of artificial joints has not changed for decades. But increased volume — about one million knee and hip replacements are performed in the United States annually — and competition have not lowered prices, as would typically happen with products like clothes or cars. “There are a bunch of implants that are reasonably similar,” said James C. Robinson, a health economist at the University of California, Berkeley. “That should be great for the consumer, but it isn’t.” ...

    Like many other countries, Belgium oversees major medical purchases, approving dozens of different types of implants from a selection of manufacturers, and determining the allowed wholesale price for each of them, for example. That price, which is published, currently averages about $3,000, depending on the model, and can be marked up by about $180 per implant. (The Belgian hospital paid about $4,000 for Mr. Shopenn’s high-end Zimmer implant at a time when American hospitals were paying an average of over $8,000 for the same model.)

    “The manufacturers do not have the right to sell an implant at a higher rate,” said Philip Boussauw, director of human resources and administration at St. Rembert’s, the hospital where Mr. Shopenn had his surgery. Nonetheless, he said, there was “a lot of competition” among American joint manufacturers to work with Belgian hospitals. “I’m sure they are making money,” he added. ...

    “Imagine you’re the C.E.O. of Zimmer,” he said. “Why charge $1,000 for the implant in the U.S. when you can charge $14,000? How would you answer to your shareholders?” Expecting device makers “to do otherwise is like asking, ‘Couldn’t Apple just charge $50 for an iPhone?’ because that’s what it costs to make them.”

  • Washington Post: Uninsured will see differing levels of help for Obamacare in Maryland, Virginia, D.C. By Lena H. Sun. Excerpts: Maryland consumers who want to buy health insurance under Obamacare in the fall will be able to read glossy fact sheets that spell out the law in simple language. Or talk to one of 325 specially trained workers who will explain the intricacies and help them enroll. Or get information via Facebook, Twitter and YouTube.

    In Virginia, it’s a different story. People can seek assistance from about two dozen special guides. Or they can go to their state legislators, who might refer them to phone numbers and Web sites operated by the federal government.

    The two states have taken vastly different paths although they have comparable numbers of uninsured: at least 844,000 in Virginia and an estimated 800,000 in Maryland. ...

    In states such as Maryland, which embraced the law and is building its own marketplace, health officials are getting access to millions of federal dollars to identify the uninsured, bombard them with information and then provide human helpers to guide them through their options. But in places such as Virginia, which rejected the law and even mounted an unsuccessful lawsuit challenging it, the enthusiasm to spread the word and the resources to do so will be much more limited.

    In a news conference Friday, Obama noted that Republicans have made it their “holy grail” to prevent people from getting health care under the law. He also acknowledged that “there are going to be some glitches” implementing the Affordable Care Act. ...

    Adding to confusion in the Washington region: Virginia is not implementing a key provision of the law that allows more people with low-to-moderate incomes to be covered under Medicaid. Both Maryland and the District are doing so. That means a greater share of Virginia’s uninsured will need help figuring out what to do. ...

    Signing up people for coverage is even more challenging in Northern Virginia. Residents there will be hearing the same TV and radio messages about expanded Medicaid options as those in Maryland and the District.

    But Virginians won’t have that option because the state is not broadening Medicaid. Community groups estimate that about 441,000 uninsured Virginians would have qualified. In states that refuse to expand Medicaid, residents whose incomes are above the poverty line (about $11,500 for an individual) will still have access to tax credits for purchasing private insurance in the marketplace. But those below the poverty level will not receive help obtaining coverage.

  • New York Times: For Obamacare to Work, Everyone Must Be In. By Robert H. Frank. Excerpts: Two beliefs continue to shape debate on Obamacare. First, pre-existing medical conditions shouldn’t prevent people from obtaining affordable health insurance. And second, people who don’t want health insurance shouldn’t be forced by the government to purchase it.

    These may seem to be reasonable positions. But they are incompatible. That’s been shown by historical events, and it’s now being strikingly confirmed by recent experience in the emerging Obamacare insurance exchanges.

    The crux of the matter is what economists call the adverse-selection problem. Uninsured people with pre-existing conditions often face tens or even hundreds of thousands of dollars in out-of-pocket medical costs annually. If insurers charged everyone the same rate, buying coverage would be far more attractive financially for people with chronic illnesses than for healthy people. And as healthy policyholders began dropping out of the insured pool, it would become increasingly composed of sick people, forcing insurers to raise their rates.

    But higher rates make insurance even less attractive for healthy people, causing even more of them to drop out. Before long, coverage would become too expensive for almost everyone.

    The adverse-selection problem explains why almost no countries leave health care provision to unregulated private insurance markets. It also predicts that requiring private insurance companies to charge the same rates to everyone will make it prohibitively expensive for most people to buy individual health insurance. ...

    What alternatives are there? One way of avoiding the adverse-selection problem would be to re-emphasize traditional employer-provided health plans. Adverse selection is less serious under such plans, because the favorable tax treatment they receive requires insurers to cover all employees irrespective of pre-existing conditions. (Insurers can meet the requirement because most people employed in any company are reasonably healthy.)

    But Obamacare was enacted precisely because employer plans fell short in many other ways. Millions of people, for example, are ineligible for such plans because they don’t have jobs. And millions of others with chronic health problems are trapped in their current jobs, because leaving them would mean losing coverage.

    Employer plans arose in the first place only because of a loophole created by wage controls during World War II. In an effort to curb the costs of the war effort, the government prohibited wage increases but, perhaps by oversight, did not prevent employers from offering additional fringe benefits as a way to combat labor shortages. Employer health plans proved an especially effective recruiting tool and had the additional advantage of not being taxed as implicit income.

    BUT if universal access to health care is the goal, employer plans are not the solution. Because global competition has increased pressure to cut costs, the number of workers with such plans has been steadily declining for more than 40 years. ...

    We must ask those who would repeal Obamacare how they propose to solve the adverse-selection problem. That problem is not an abstraction invented by economists to justify trampling individual liberties. As experience in most countries around the world has confirmed, it is a profound source of market failure that renders unregulated insurance markets a catastrophically ineffective way of providing access to health care.

  • New Orleans Times-Picayune: 6 Louisiana cities among nation's 10 most expensive for health care, report says. By Rebecca Catalanello. Excerpts: With Louisiana near the top of many of the country’s “worst of” health lists — asthma, diabetes, heart disease, obesity — it could be tempting to credit this distinction to our state’s particularly unhealthy population.

    But the study, which was commissioned under the terms of the federal Patient Protection and Affordable Care Act, found that differences in traditional, fee-for-service health care spending exist in spite of age, sex and health status. ...

    Newhouse said that while researchers didn’t detail the reasons for variation in specific communities, cost breakdowns indicate that the services received after leaving the hospital — home health care, skilled nursing, rehabilitation, long-term care and hospice — account for much of Louisiana’s above-average spending.

    That some of these same services have been identified as major areas of fraud may also explain the higher costs, the data suggest. ...

    Jonathan Skinner, a professor of economics at Dartmouth College, who has studied variations in health care spending for years, said that Louisiana has several strikes against it, even when studies like this one control for poverty, race and health status. Besides having an incredibly unhealthy population, he said, individual patient care between hospitals and community clinicians is often fragmented, leading to high percentages of hospital readmissions soon after discharge. Louisiana also has a robust market for what he called “entrepreneurial home health providers” that clearly plays a role. ...

    States where researchers found spending to be lowest, Gee said, are those with more developed, long-standing managed-care systems: New York and California, for example. Among the nation’s 10 lowest-cost communities were Rochester, Buffalo and the Bronx in New York and Stockton, Sacramento, Santa Cruz, Santa Rosa and San Francisco in California. ...

    The report does suggest that post-acute services like home health appear to play such a hefty role in driving up costs and could be an indication of Medicare fraud. And Louisiana is among six states, including Texas and Florida, that the U.S. Office of Inspector General last year deemed to be at high-risk for Medicare fraud.

  • Christian Science Monitor: Mitt Romney to GOP: Don't shut down government to kill Obamacare. At a fundraiser in swing-state New Hampshire, Mitt Romney urges Republicans to rally behind 'electable' candidates for 2016 and not to risk a government shutdown to stop Obamacare. By Peter Grier. Excerpts: Mitt Romney leaped into the deep waters of debate over the future course of Republican Party policy Tuesday night in a speech near the shores of New Hampshire's Lake Winnipesaukee where the former GOP presidential candidate has a vacation home.

    Mr. Romney, who described himself as a “severe conservative” during the 2012 campaign, appeared to side with the pragmatic wing of his party with most of his remarks, made at a political fundraiser for the New Hampshire Republican Party. In particular, he warned against shutting down the government in an attempt to strip funds from the Affordable Care Act, known informally as “Obamacare."

    “I badly want Obamacare to go away, and stripping it of funds has appeal. But we need to exercise great care about any talk of shutting down government,” Romney said. “What would come next when soldiers aren’t paid, when seniors fear for their Medicare and Social Security, and when the FBI is off duty?”

News and Opinion Concerning the "War on the Middle Class"
Minimize "It is a restatement of laissez-faire-let things take their natural course without government interference. If people manage to become prosperous, good. If they starve, or have no place to live, or no money to pay medical bills, they have only themselves to blame; it is not the responsibility of society. We mustn't make people dependent on government- it is bad for them, the argument goes. Better hunger than dependency, better sickness than dependency."

"But dependency on government has never been bad for the rich. The pretense of the laissez-faire people is that only the poor are dependent on government, while the rich take care of themselves. This argument manages to ignore all of modern history, which shows a consistent record of laissez-faire for the poor, but enormous government intervention for the rich." From Economic Justice: The American Class System, from the book Declarations of Independence by Howard Zinn.

  • New York Times op-ed: Phony Fear Factor. By Paul Krugman. Excerpts: We live in a golden age of economic debunkery; fallacious doctrines have been dropping like flies. No, monetary expansion needn’t cause hyperinflation. No, budget deficits in a depressed economy don’t cause soaring interest rates. No, slashing spending doesn’t create jobs. No, economic growth doesn’t collapse when debt exceeds 90 percent of G.D.P.

    And now the latest myth bites the dust: No, “economic policy uncertainty” — created, it goes without saying, by That Man in the White House — isn’t holding back the recovery. ...

    But, as I said, we live in a golden age of economic debunkery. The doctrine of expansionary austerity collapsed as evidence on the actual effects of austerity came in, with officials at the International Monetary Fund even admitting that they had severely underestimated the harm austerity does. The debt-scare doctrine collapsed once independent economists reviewed the data. And now the policy-uncertainty claim has gone the same way. ...

    The truth is that we understand perfectly well why recovery has been slow, and confidence has nothing to do with it. What we’re looking at, instead, is the normal aftermath of a debt-fueled asset bubble; the sluggish U.S. recovery since 2009 is more or less in line with many historical examples, running all the way back to the Panic of 1893. Furthermore, the recovery has been hobbled by spending cuts — cuts that were motivated by what we now know was completely wrongheaded deficit panic.

    And the policy moral is clear: We need to stop talking about spending cuts and start talking about job-creating spending increases instead. Yes, I know that the politics of doing the right thing will be very hard. But, as far as the economics goes, the only thing we have to fear is fear-mongering itself.

  • New Yorker Magazine: The Justice Department's “War” on Wall Street: Still No Criminal Charges. By John Cassidy. Excerpts: It took them a while, but the Feds are finally going after some of the country’s biggest banks for alleged wrongdoing during the great housing and credit bubble. In the past few days, the Department of Justice has sued Bank of America for willfully understating the risks attached to hundreds of millions of mortgage-backed securities it sold in 2007, and J. P. Morgan Chase has revealed that two different U.S. attorneys’ offices, one in California and one in Philadelphia, are investigating whether it broke securities laws and duped investors with some of the mortgage deals it put together.

    But while the new cases are significant and likely to go on for some time, they don’t answer the question of whether anybody on Wall Street will ever end up in court, or face the possibility of prison time, on criminal charges arising from the mortgage mess. My take: there is no need for anyone on Wall Street to lose much sleep, and that includes Brian Moynihan, the chief executive of Bank of America, and Jamie Dimon, the head of J. P. Morgan. About the worst that is likely to happen is that the two big banks will be forced to pay some hefty fines, which, with both making billions of dollars of profit in the latest quarter, they can easily afford.

  • New Haven Register editorial: Congress should close tax loopholes on executive compensation. Excerpts: When it returns from recess next month, Congress should pass common-sense legislation, cosponsored by U.S. Sens. Richard Blumenthal, D-Conn., and Jack Reed, D-R.I., that would limit the tax deductions large public corporations can claim on compensation of executives.

    The two New England Democrats proposed the bill, the Stop Subsidizing Multimillion Dollar Corporate Bonus Act, last week, just before Congress broke for its summer recess.

    It aims to close massive loopholes in a 1993 bill that limited deductibility on certain executives’ pay up to $1 million, with exceptions for so-called performance-based compensation. The bill, which President Bill Clinton championed on the campaign trail in the 1992 election, was well-intentioned, but has been a near-complete flop because of corporations’ successful efforts to find work-arounds.

    As Reed and Blumenthal pointed out in announcing the bill, Congress’ Joint Committee on Taxation estimates the legislation would add more than $50 billion to federal coffers over 10 years by capping the amount of deductible salary at $1 million per employee and eliminating the exception for compensation such as non-equity incentive plans, stock options and stock-appreciation rights. ...

    Corporations are moving more and more executive compensation into tax shelters at exactly the time that the Treasury is starved for revenue and Congress has struggled to come up with meaningful deficit-reduction measures. They’re also doing so at a time when the disparity in pay between top executives and their employees is at a record high. ...

    “What are America’s CEOs doing to deserve their latest bountiful rewards? We have no evidence that CEOs are fashioning, with their executive leadership, more effective and efficient enterprises. On the other hand, ample evidence suggests that CEOs and their corporations are expending considerably more energy on avoiding taxes than perhaps ever before — at a time when the federal government desperately needs more revenue to maintain basic services for the American people.”

If you hire good people and treat them well, they will try to do a good job. They will stimulate one another by their vigor and example. They will set a fast pace for themselves. Then if they are well led and occasionally inspired, if they understand what the company is trying to do and know they will share in its sucess, they will contribute in a major way. The customer will get the superior service he is looking for. The result is profit to customers, employees, and to stcckholders. —Thomas J. Watson, Jr., from A Business and Its Beliefs: The Ideas That Helped Build IBM.

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