Welcome to IBM Employee News and Links

Highlights—October 4, 2014

• International Business Times:

  Amid Global Push, IBM Has Shrunk Its U.S. Workforce By Half Since 2000. By Paul McDougall. Excerpts: IBM’s employs about 430,000 workers worldwide. It stopped providing country-specific figures after 2009, but a group that is looking to unionize the tech giant maintains that, after several years of annual layoffs, IBM will have less than 80,000 workers stateside following the Lenovo sale. ...

  In 2000, before the .com-fueled tech bubble burst, IBM maintained 153,587 workers in the U.S. It was also the last year in which it saw a year-over-year increase in its domestic headcount.

  IBM since the mid-1990s has been aggressively expanding operations in low-cost countries and regions like Brazil, Eastern Europe and Asia—most notably in India, where tech salaries are less than half of what prevails stateside. Estimates put IBM’s headcount on the subcontinent as high as 150,000—or roughly double the number of workers it employs in America. That’s up from about 50,000 a decade ago.

  “The notion of IBM as an iconic American tech company is passé,” said veteran industry watcher Rob Enderle, principal analyst at The Enderle Group. “It remains iconic but this is a company that can shift resources globally at a moment’s notice.” ...

  IBM executives have defended the company’s paring of U.S. jobs and overseas expansion by noting that it needs to control costs while building a presence in the world’s hottest growth markets. In the most recent second quarter, IBM reported revenues from Asia-Pacific markets of $5.3 billion, more than a fifth of its total Q2 sales of $23.9 billion.

  Critics say IBM is merely engaged in labor arbitrage, seeking skilled tech workers at the lowest possible cost regardless of location and impact on local communities. “This is about shifting work and cutting costs,” said Lee Conrad, a spokesman for Alliance at IBM, the pro-union group. “IBM will never again be the big powerhouse in the U.S. that it once was for employment.”

  An IBM spokesman dismissed the claim, calling the Alliance “an ad hoc group that doesn’t represent the workforce at IBM.”

• The Register:

  Lenovo to finish $2.1bn IBM x86 server gobble in October. A lighter snack than expected – but what's a few $100m between friends, eh? By Brid-Aine Parnell. Excerpts: Lenovo will finally get to close the deal on IBM’s x86 server division on 1 October – after slicing a few hundred million off the price tag.

  The Chinese tech firm will finish the acquisition with a closing purchase price of $2.1bn, which is a little lower than the original $2.3bn price tag because of a change in the valuation of Big Blue’s server inventory and deferred revenue liability, Lenovo said. ...

  As part of the server biz deal, Lenovo will also partner up with Big Blue on storage and software, becoming a reseller of IBM products including Storwize, LTO, Smart Cloud and Platform Computing.

• Seeking Alpha:

  The Investment Contest Of The Century: Warren Buffett And The Stock Market Go Toe-To-Toe Over IBM. If IBM's current 2015 EPS Roadmap is extended to become IBM's 2020 EPS Roadmap, this could easily become IBM's lost two decades.

  There are four investors in a corporation: customers, employees, shareholders and the society they cohabit: customers invest in products and services; employee-owners invest their time and skills; shareholders invest their money; and society governs the corporate rules of engagement.

  • IBM's customers are disgruntled and IBM knows it. As I covered in a previous article IBM dropped from its 2008 IBM Annual Report that simplifying and streamlining its internal processes had improved client satisfaction.
  • Customers are tired of it taking too long to propose, prototype, price or even renew an IBM software solution. Simplicity sells; complexity impacts revenue and profit.
  • Customers are exhausted by the cost of maintenance and integration nightmares of upgrading IBM's middleware software. IBM has in many ways created the cloud market through its own lack of integration, poor ease-of-use and hidden long-term costs of software maintenance. IBM has raised these costs so high that the cloud is a viable cost-effective solution for many - - even if it might not be secure enough.
  • Customers are fatigued by IBM's internal corporate policies that destroyed a professional sales organization — one that in the past provided timely and insightful solutions. IBM tells its sale force to sell solutions, yet its own internal practices have resulted in a customer-facing employee turnover percentage that would embarrass a fast food restaurant.
  • There are no more true-blue IBM accounts. IBM's greatest moat — its customer relationships — has been drained and its outer walls — its technology — are now under attack. ...
  • IBM's employees are disengaged and IBM knows it. As I covered in a previous article, IBM highlighted for seven straight years that it was simplifying and streamlining its internal processes. It claimed it was improving sales force productivity, even though revenue per employee — the primary measurement of sales force productivity — has been flat for more than two decades.
  • IBM's sales force is not engaged. IBM's employee-owners are doing their best, but the corporate leadership treats them paternalistically — creating dependence by restricting their responsibilities, abilities and freedoms. IBM makes all decisions for them and their managers. Expense not revenue is at the heart of every decision. The IBMer of today is transaction oriented — tell me what to do and I will do it because performance doesn't really matter. The word THINK is a lost memory.
  • The last IBM Global Pulse Survey to measure employee morale was done in late 2010. It was not an easy read for someone that cares about IBM. Evidently few ask to see the data as even the Harvard Business Review publishes articles as if it were a positive (How IBM Is Changing Its HR Game); which it wouldn't do if anyone saw the actual data. IBM gathered the data and promptly deposited it in the nearest trash bin. Now it doesn't even bother gathering the data.
  • IBM's human resource organization over the last fifteen years has been nothing but the right arm of finance. Gallup's research in the State of the American Workplace has shown for decades that disengaged employees impact a corporation's bottom line. A 2010 update, entitled Employee Engagement and Earnings Per Share, documents the impact on earnings per share. Human resources needs to carry this article into its meetings with finance. Their failure to stand up for the IBM employee has cost IBM at least $156 billion over the last fifteen years.
  • IBM employees are disengaged and discouraged, and IBM doesn't care.
  • IBM's shareholders are hesitating and IBM knows it. IBM is no longer an invest-and-forget stock. It is high risk. ...
  • IBM's market value will regain its steady advance when: dissatisfied customers become satisfied; disengaged employees, re-engage; hesitant shareholders regain their trust; and finally, when IBM again understands that it is a member of the society it depends on for existence.
  • Until then IBM has proposed you judge it by a different metric — earnings per share. You will have to decide if focusing on a single metric is either good business or sound investing.

  Selected reader comments follow:

  • As I have stated so many times, I was an IBMer for over two decades and finally left after mucho disgust, watching the mid-senior level execs' disdain for any employee below director level. I had new hires ask me point blank 'why does management hate me so much?' Talk about a caustic work environment.

    You are correct in saying 'until management corrects the morale issue, nothing else will be fixed.' Those spewing 'shareholder value' and 'IBM is undervalued' dogmas simply do not know the lay of the land as viewed from within. If Ginni and her c-suite team do not right the ship from a 360 degree stakeholder perspective, those dogma spouters will inevitably see the internal reality go external.

  • John, Regarding the "Buffett effect on the share price", I am positively correct and you know it. The stock started going up recently after Buffet disclosed buying additional shares, following a couple of quarters during which he acquired minimal number of shares. After the news of his purchase evaporated, the stock price returned to stagnation.

    Regarding "Buffett's dilemma of owning IBM", you know as well as I do, that the minute he makes any negative comment about IBM leadership or sells any of his shares, there will be a drop in price. And we know it would be difficult to sell this many shares incognito. If like many of us do think IBM needs leadership change, he needs to mount a clandestine operation to have them replaced or else, share price could go in any direction. Not sure he would like that uncertainty. Does not seem to be his style to interfere anyway.

    Regarding the share buy-back program, I was reading an interesting article in The Economist of September 13-19 Business section and the damage it can do to a corporation's future when buy back is excessive. According to their article, IBM had the 3rd largest share repurchase program (in $$) of $100+ billion between 2004-2013, as shown in their chart, representing 64% of cash flow from operation. Add the dividends to that number and that does not leave much to reinvest in such a large business. Only ExxonMobil and Microsoft repurchased topped them in dollars, but it represented 45% and 50% of their cash flow, respectively. The only other large organization repurchasing more as a % of cash flow, was CISCO with 69%. And we know how well they are doing as a company and how well their stock has performed, although if I am correct, they are still flush with cash. Doesn't that tell us something?

  • The point Pete made about employee morale is real. I experienced it first hand in the last 3 years of my career spent at IBM. My company was acquired by IBM in 2010. While the morale problem I observed was IBM US, I can also say that IBM was far from being revered as an employer in India, this coming from our own India employees before the acquisition was complete.

    BTW, as I have stated before, I do not have any gripe about how IBM treated me, while I was there or when I retired. I see problems as an investment potential with what I observed. I also made serious IBM investment through my transferred 401K and was excited when Buffett invested the same year as my transfer. I held this investment until May 2014.

    I think Pete and others (like myself) are bringing serious potential risks that all investors should analyze for themselves.

    If you think that share buy-backs create more value than investing in new development and innovation, not treating its employees (main assets) in a manner conducive to increase productivity/creativity, being stuck into cumbersome internal processes that stifle everything... and I could go on.

  • While the rank and file are being systematically slaughtered like cattle taken to market, the exec population is corporate cronyism at its finest, lining each others pockets and shuffling each other around in 'fabricated positions' to preserve their state of affairs. They know it's near the end, so they're scavenging the carcass while there's something left to scavenge.
  • I very recently lived within arm's reach of IBM's Research Triangle Park campus. Just driving by, it had a surreal sense of 'what used to be', and not 'what is to come'. Perhaps the signage was just too outdated or the streets too quiet. An anecdote to be sure, but sometimes a book may be judged successfully by its cover, too.

    Regarding their financials, from what I have read elsewhere, my impression is that they are achieving earnings per share and other financial metrics through capital manipulation, and not organic sales growth. Buying back shares and selling off business units versus seeing sales grow from superior product mix and outstanding customer orientation are two different paths to the same short term outcome, but yield two very different long-term outcomes. At some point, in the first case, the mast you have been hacking at to patch holes in the ship can no longer hold up a sail.

• WRAL TechWire:

  Lenovo commits to hiring IBMers in x86 deal but no guarantees. By Rick Smith. Excerpts: More than 7,000 IBM employees, including some 2,000 based in Research Triangle Park, will be transferring to Lenovo as the $2.1 billion deal for IBM's x86 business closes this week, a senior Lenovo executive said Monday morning.

  However, there are no guarantees going forward.

  Gerry Smith, executive vice president of Lenovo Group and president of Enterprise Business Group and Americas Group who will oversee the combined server businesses of Lenovo and IBM, said in a conference call that Lenovo would stand by stated previous commitments to hire all IBM workers. ...

  Parker also reiterated Smith';s comments about jobs. "What decisions will be made over time is not known," Parker said, noting that decisions will be made about driving sales, growing revenues and finding efficiencies.

• The Register:

  So long Lotus 1-2-3: IBM ceases support after over 30 years of code. One of computing's first killer apps bites the dust. By Iain Thomson. Excerpts: On Tuesday, with no fanfare, IBM closed the last chapter in the life of one of the most iconic early computer programs, Lotus 1-2-3, when it withdrew support for the final build of the software.

  IBM Lotus 123 Millennium Edition, IBM Lotus SmartSuite 9.x, and Organizer have now officially all passed their end of life support date and, according to IBM's website, "No service extensions will be offered" – not that anyone is seriously using the spreadsheet any more.

  It's a sadly muted end for what was, at one time, the world's premier spreadsheet. Lotus 1-2-3 was one of the first applications that made IBM's original PC a serious business tool, but it fell by the wayside due to poor coding decisions, failure to adapt, and the crushing tactics of Microsoft.

• Glassdoor IBM reviews. Selected reviews follow:

  • “A very complex organization that is more inwardly than outwardly focused.”

    Former Employee — Associate Partner I worked at IBM full-time for more than 5 years.

    Pros: A number of opportunities, especially international. Technology expertise world class, as expected. Many of the people who work there are top notch in more ways than just their expertise.

    Cons: Still too much management dead wood. Decreasing revenue. Laying off intellectual muscle. You are always 60-90 days away from getting "resource actioned" (laid off) at any given time. Customers often overwhelmed by sales team "show of force" (too many sales people at meetings).

    Advice to Senior Management: IBM needs organizational innovation more than it needs technology innovation. Organizational arrogance is still a problem, especially in sales.

  • “IT Nightmare”

    Current Employee — Computer Specialist in Denver, CO. I have been working at IBM as a contractor for more than 3 years. Pros: I no longer work there. Cons: IBM has the worst management I've ever seen in my life. Advice to Senior Management: Quit your day job!

  • “Mixed feelings”

    Current Employee — Advisory Software Engineer. Pros: Great people in the research, good work/life balance. Cons: Although you think of IBM as a tech company, great majority of people are non-technical (sales etc). The best people are not going to IBM recently but to other companies.

  • “Low morale, high-stress environment”

    Current Employee — Systems Administrator. I have been working at IBM as a contractor for more than 5 years. Pros: Started off OK with decent pay, and pretty good employees and managers, telecommuting is great. option is great. Cons: Massive lay-offs every year (of both contractors and regular IBMers) leaves everyone stressed and morale incredibly low. Incompetent management. Pay freezes, furloughs, unpaid overtime. Extreme pressure to meet deadlines without compensation, and while understaffed, some teams by 50%. Advice to Senior Management: Treat your employees and less like resources!

  • “Heading in the wrong direction”

    Former Employee — Senior Project Manager in Somers, NY. I worked at IBM full-time for more than 10 years. Pros: Work/life balance. Peers are professional and good to work with. Cons: Too driven on quarter goals and making cuts to achieve them in light of long term strategy. Advice to Senior Management: Think longer term strategies.

  • “Too much bureaucracy”

    Current Employee — Technical Lead in Guadalajara, Jalisco (Mexico). I have been working at IBM full-time for more than a year. Pros: It is a good company to learn, a bunch of education available and great co workers. You have good benefits like home office. Cons: It is hard to have salary raises, they talk a lot about 'visibility' however that implies talking too much about your work when it is supposed to be a responsibility of management to notice it. It is even harder to talk about your job when you are a technical guy and your manager isn't.

  • “Walked away with tremendous exposure and opportunity but with a new found understanding for politics and bad management”

    Former Employee — Watson Sales and Strategy in New York, NY. I worked at IBM full-time for more than a year.

    Pros: Watson has phenomenal technology that inspires with a brilliant team you work with everyday. Market demand pushes opportunities into the door more than the company can handle which is a good problem to have.

    Cons: Bureaucratic and Political. Too few leaders and too many authoritative managers that cannot lead. Culture is trying to change and be more like Google and Apple but slow to move ahead.

    Advice to Senior Management: Focus on client relationships, team relationships, and building an environment where public and corporate pressures on numbers do not negatively impact the dynamics.

  • “Good benefits and great work life balance. Not a great work environment”

    Former Employee — Consultant in Washington, DC I worked at IBM full-time for more than a year.

    Pros: Good benefits, good work life balance. Except to get what you would get at any large American corporation. The benefits are good, the network is large, there are opportunities to work remotely.

    Cons: No training, not great work environment, no mentorship. IBM is a factory for entry level work. Tons of people leave after a year or two in the organization. The people that stayed for longer in the consulting world were not very happy at the company and they showed it. It was hard to find people who had been there for an extended time and were happy with their jobs. I didn't know any.

    Advice to Senior Management: Create career pathways. Get people on remote consulting projects more involved with other people. Assist with B-school payments so people are incentivized to come back.

  • “Employees are fleeing this company”

    Current Employee — Anonymous Employee.

    Pros:

    • Flexibility to work at home
    • Teammates are very talented and experienced
    • Lower level managers are supportive of your career goals.

    Cons:

    • IBM does not live by its 3 values. The company's only value is EPS (Earnings per Share)
    • Routine layoffs, pay cuts, furloughs, and benefit reductions in every division regardless of performance. When company is doing well these actions do not disappear.
    • Internal systems and software are poor for an established technology company
    • Very difficult to transfer internally as there are always hiring freezes
    • No perks. Need funding approvals to flush the toilet!

    Advice to Senior Management: You have lost the trust of customers and employees. It's too late to repair the damage. A senior leadership change is needed.

  • "Different divisions are like different companies”

    Current Employee — Director in New York, NY. I have been working at IBM full-time for more than 10 years.

    Pros: Lots of opportunity to move to new assignments and shift career paths over time. Great maternity and part time programs. Colleagues are mostly knowledgeable and competent, with some exceptions of course.

    Cons: Executives from different parts of the company don't always cooperate, causing conflict and chaos with plan churns. Performance measurements are frequently out of employee's control, and ratings (and bonuses and raises which are based on this) don't typically reflect the hard work that is done to keep slower growth or declining businesses viable.

    Advice to Senior Management: Need some new SVPs who collaborate and cooperate better to integrate across divisions, product lines and services. Not rewarding top performers in poorly performing businesses makes it very easy for them to leave only to hurt the business more.

  • “Fantastic Company”

    Former Employee — Project Manager in Austin, TX. I worked at IBM full-time for more than 8 years.

    Pros: IBM was a fantastic company to work for and provided plenty of opportunity for skills development, learning, and career growth. It also seemed to me that employees got out of IBM exactly what they put into it. Some just coasted along and got "average" performance reviews for average performance. But for those who really want to feel like they are making a difference and want to expand their career, IBM will support them full stop. NOTE: This review is based on my work with Software Group within IBM, which tends to be much more progressive and faster paced than other groups.

    Cons: The growth of my career and opportunities for development were directly proportionate to how progressive and open minded my direct manager was.

    Advice to Senior Management: Processes and policies are the cornerstone to any solid company. Continue to ensure they don't get in the way of employees being able to create and innovate.

  • “IBM losing its way with weak executive team (as the talented and old guard move on)”

    Current Employee — Anonymous Employee I have been working at IBM full-time for more than 3 years.

    Pros: It is a company that you could work at for a life-time, as long as you keep your nose clean and your opinions to yourself... ensure that you are very politically aware and make your line management look good.

    Cons: The business has become FAR too political given cut-backs to resources across the board, especially with weak performance from the 'Systems & Technology Group' and downturn in IGS signings/renewals. The BEST caliber of executive management has left IBM to work for other transformative or startup companies, leaving a layer of less effective sales managers and sales operations running the business.

    Advice to Senior Management: Honesty and transparency with employees.

  • “OK for a first job out of college, but I know much better opportunities are out there”

    Current Employee — Senior Consultant in Washington, DC. I have been working at IBM full-time for more than a year. Pros: High paying, met a lot of great people, good vacation time but hard to use it. Cons: Management needs work. It's hard to see the impact or appreciation of your day-to-day efforts.

  • “The only down side is no merit pay increase nor bonus”

    Current Employee — Project Manager. I have been working at IBM full-time for more than 3 years. Pros: Work from home 100%, great boss, great training programs. Cons: No pay increase nor bonus despite a stellar review. This was because the company didn't achieve its revenue target. Advice to Senior Management: Keep good people their merit increases despite target misses. Bonuses should be withheld if targets aren't achieved.

  • “It use to be a good company to work for.”

    Current Employee — Anonymous Employee. Pros: IBM is a large company that is financially stable and services all aspects of the IT business. Cons: There is no work-life balance at IBM these days. They have forgotten what the company was built on. They have cut out all the perks and are only interested in earnings per share. Advice to Senior Management: IBM needs a new CEO.

  • “A once great company being destroyed by terrible leadership”

    Former Employee — Executive Manager in Boulder, CO. I worked at IBM full-time for more than 10 years.

    Pros: When I started at IBM it was an amazing place to work. Great group of extremely dedicated talented and driven people. Superb, world-class education available to all employees, great culture, IBM had the world by the tail. That all changed when Sam Palmisano took over as CEO in 2001.

    Cons: Sam destroyed the company via lack of vision, extremely poor leadership, and excessive cost cutting. IBM internally is now a terrible place to work, with constant layoffs and a culture of fear and intimidation. They are so tied up in their own bureaucracy that they can't get anything done quickly. Many of the superb employees have left and those that are left are afraid to do anything for fear of losing their jobs.

    Advice to Senior Management: The company needs someone like Lou Gerstner back at the helm. Gini Rommetti is just a "yes (wo)man" for Sam and is not strong nor innovative enough to lead the company out of the dire straits they're in.

  • “Lots of changes over 30 years...at this point ZERO work life balance”

    Current Employee — Program Manager in Southbury, CT. I have been working at IBM full-time for more than 10 years. Pros: Great people, great opportunities, very committed people especially in the US and Europe, endless challenges and opportunity. Cons: Work/life balance, nothing is ever enough, always something more can and needs to be achieved, always dangle the carrot but never the reward behind it...non-existent raises. Advice to Senior Management: Listen to employees, don't always listen to middle-management. They are only concerned about upward movement of their own career.
• Alliance for Retired Americans Friday Alerts. This weeks headlines include:
  • Thousands of Alliance Members Join Tele-Town Hall Calls with Candidates
  • Koch Sisters Video Refutes Misinformation about Social Security
  • Koch Brothers, Walton Family Get Several Spots near Top of Richest Americans List
  • Pennsylvania Alliance Members Speak as Part of Minimum Wage Campaign
  • Activists Collect 500,000 Petitions in order to Keep Social Security Offices Open
  • In Case You Missed It: Wednesday was International Day of Older Persons