According to company insiders, UK boss David Stokes yesterday hosted a phone conference with employees at 1pm to inform them of their fate.
“Stokes got over 60 people on a conference call to tell them they are at risk of redundancy. They have entered into a consultation period,” said a person close to the matter.
The cuts are largely hitting the client execs from the Systems and Technology Group – the folk who spend all their time in front of customers that buy hardware – as well as some people in the channel team, sources told us.
Reader comments follow:
It's depressing to see that IBM is still trying to cut its way to growth, and doesn't appear to have learned anything from the failure of Roadmap 2015.
The thing is, IBM's customers still want to buy hardware and software; just no longer from IBM. IBM is handing them over to the competition to lap up. And the competition is hiring. Anyone with any talent from IBM will find that there are plenty of jobs out there, and will suddenly realise that they can actually earn a decent salary elsewhere. Even some of IBM's partners are hiring: there are still people out there who still believe it's worth buying IBM (and it should be: some of the products are excellent, despite there being no investment in development).
With IBM not even able to put a salesman into the customer, as they've all been sacked, the BPs (or at least those who haven't yet deserted) are picking up the scraps.
As for replacing those at the top: it's probably too late for that. They're determined to destroy the company and replace it with a third-rate cloud provider, who nobody will use because IBM has managed to crap on pretty much every customer it has.
It will take a hell of a lot more than that to restore IBM's reputation.
Most of the people with any talent and ambition left a while ago! They have been losing talented people for about 5 years now and to be honest, the ones that have stayed are the ones that are scared of life outside of Big Blue. Some of those people will be forced into fleeing the mother ship now and will realize that they should have had the guts years ago!
Two weeks ago, there was a online forum along the lines of — what do we need to do at IBM to make it a great place to work. I think I missed the suggestion that said lets make a bunch of folk redundant, so that everyone else stays on and accepts the deteriorating conditions.
But still, why are such immense resources being allocated to stock repurchases (See Exhibit 1: since 2000 to date IBM has paid a staggering $150 BILLION for share repurchases almost twice what was spent on R&D during the same period)? Corporate executives give several motives but none of them has come close to the illuminating power of this simple reality: stock-based instruments and reward mechanisms constitute the majority of corporate executive remuneration, and in the short term (or as we can observe in case of IBM long-term, too) buybacks have this almost supernatural ability to drive up stock prices.
In 2012 42% of the 500 highest-paid executives’ compensation came from stock options and 41% from stock awards (Source: William Lazonick, HBR, September 2014). By increasing the demand for a company’s shares (decreasing their number in the open market), open-market buybacks automatically lift its stock price, even if only temporarily, and can enable the company to hit quarterly earnings per share (EPS) targets (the denominator decreases, sometimes significantly – See Exhibit 1).
In other words it is the executives themselves who repeatedly benefit from price increases generated by repurchases—by selling their personal shares after exercising stock options (generously awarded as part of their compensation packages) at attractive strike prices. And this is exactly what has been happening at IBM – execs continued to sell their shares almost immediately after exercising stock options. For those interested in the topic, Yahoo Finance provides a very comprehensive analysis of exec stock option transactions. Fascinating read! ...
What should happen instead? This is a list (and it is by no means complete) of some major changes that I believe should happen fast if the Firm were to reinvent itself yet again:
IBM was a truly great and exceptional firm and it really breaks my heart to watch it slowly (and hopefully not yet inevitably) degrade and lose its cutting-edge competitive advantage. However I do believe that with some effort, determination, focus and open communication the ship can be saved. This ship is full of truly bright and courageous people who are the main asset this great Firm has ever had.
The fact that IBM buys back shares is not a problem in itself. The problem is the approach IBM is using to buy back shares. It is using debt, not cash generated from its underlying business, because the underlying business is not performing well. ...
Repurchasing shares decreases the equity outstanding. Since IBM's shares are not being funded from cash derived from its operations, its debt levels relative to equity levels have been increasing rapidly. That is why the chart below is a bit unsettling. ...
IBM needs to stop repurchasing shares. It is already giving shareholders return in the form of dividends. It does not need to give the shareholders additional incentives to hold onto the company's stock.
IBM needs to focus on the long-term perspective of the company — producing. IBM's focus on the short-term benefit of a high stock price may prove to be harmful going forward. It has to find some way to generate that revenue.
Dear B.E.: I think your dentist is using too much nitrous oxide. ...
IBM is a sales organization, and revenues from its three core businesses — services, software and hardware — are in a downward spiral. IBM is inflexibly huge, and in today’s environment, size doesn’t protect it from emerging long-term threats when customers change their buying habits. Imagine the time it takes for an aircraft carrier to make a 90-degree turn. IBM is like that aircraft carrier, and cloud computing is shifting the enterprise IT landscape, forcing IBM to make course changes. Because computer resources are increasingly delivered by cloud providers rather than traditional enterprise IT departments, the demand for IBM’s high-end servers and software has slowed to a crawl. Additionally, “software as a service” is gaining traction, forcing the middleware and systems management markets to make significant changes. And IBM’s mainframe market is disappearing as new virtualization technologies enable IT people to deploy and manage workloads via a collection of commodity x86 servers. Finally, customers’ appetite for multimillion-dollar IT systems hasn’t recovered from the Great Recession, and a recovery is not expected for a long time.
Everything about this $90 billion-revenue (down from $107 billion in 2011) company is big. Big is safe — like having an elephant in bed with you — but heaven help you if it sneezes and rolls over. IBM’s stock price is down 50 points since Rometty took over in 2012. Revenues have declined for 10 consecutive quarters, and its historic businesses are fading. Still, IBM’s century-old culture hasn’t changed much. Big Blue is too inflexible to learn new dance steps, too huge to respond creatively to changes in the market, too labyrinthine to recognize the problem and find a repair consensus. IBM has more moving parts than a trainload of Swiss watches. The company looks synchronized on the outside (some managers wear golf shirts on weekends), but on the inside, its multilayer executive team is a blueprint for the Tower of Babel.
Pros: At one time it was a good place to work. They paid me.
Cons: It became a terrible place to work and from what I understand not much has changed.
IBM has sold it's PC, retail and now server groups...what's left?
Advice to Senior Management: Eventually you will be looking for another job. There are enough of us 'formers' out there that will hopefully influence companies to not hire you.
Pros: Good work/life balance and work from home.
Cons: No salary hikes; talent not recognised. I was the top rater for consecutive two years but still had the same salary after three years of my joining with IBM. You will find HR only two times in your entire employment time in IBM: once you join the company, and once you leave it.
Pros: IBM does allow many people to work from home and this cuts down on the stress of traffic and enhances time with your family. Additionally, your peers are some of the most highly respected professionals in their area and it is easy to learn from them. IBM is a big brand name and that power opens doors into B2B clients and business partners.
Cons: Higher management acts as if there hair is on fire and that you need to put it out! There is actually screaming in some business meetings as we are trying gain a common road. Decisions that are made at one meeting are undone at the next and you never know what decision to follow — makes it hard to "get it right".
Pros: Some of the people with whom I worked were pros for this organization — some of my peers, the technical line staff, and occasionally an executive who understands the balance of delivering well with ensuring overdelivery is avoided. Executives take the manager's side on most manager-employee disputes.
Cons: They offer very poor compensation vs. the market, and offer no consideration of work-life balance. People at sub-executive levels literally live in fear of "resource actions" that are executed annually to move more resources offshore for a (currently) favorable price model. Repositioning the truth to the customer to reflect internal changes in policy or strategy is commonplace.
Advice to Senior Management: If you choose to work for them in this capacity, expect overwork (80-90 hours/week without a break for months and months on end). IBM promotes and encourages an overarching corporate drive to move all domestic resources offshore for no quality reasons, but to simply offer the customer a cheaper deal.
Pros: Brand recognition. Competitive compensation. They have spacious office space.
Advice to Senior Management: Give value to giving back to your people. Consider 360 degrees performance review.
Pros: No compulsion to go to office if you are not allocated in a project.
Cons: I have a very bad experience of getting allocated to project in IBM. Despite me telling my work location preferences I was assigned to distant office which was about 2 hours journey from my home. No proper interaction in office. You will feel like resigning in first month itself. Think thrice before joining this organization.
Advice to Senior Management: Should follow proper procedure for new joinee.
Advice to Senior Management: Realize that people makes money for company not useless greedy managers. So invest into them, into relation, education; people will be happy then working for IBM => customers will be then happy and not leaving IBM.
Pros: Less Work. Can work from home.
VERDICT: You be here, for sake of holding your job. If you can work here, you can work anywhere else.
Advice to Senior Management: Are you blind?!
Pros: IBM is great for people with families. There is a lot of flexibility in your hours and when/where you work. You'll find some very smart people here, and I do have to say, most of my closest friends are from IBM, because they are just that nice. There's some flexibility in moving around the company and trying different roles.
Cons: Everything here, salary/bonus, promotions are generally just a numbers game, whatever is available in the pool. Employees feel under appreciated. No more real perks like free coffee. Salary is more likely on the low end.
Advice to Senior Management: Everything is just a numbers game now, and that gets passed from upper management all the way down, so I'm not sure how much can actually be done or changed.
Pros: Good domain and technology exposure. Work/life balance is good in most of projects (barring some exceptions). Very rich repository of techno/management training material that can avail at your pace. Very open internal social network for collaboration.
Cons: No clear visibility on personal growth and promotion. IBM has blindly acquired many products and individual brand manager does not know how to handle various IBM brands to resolve client's business problem. This results in fragmented view of IBM in front of client.
Office Culture is highly depended on team you are working with.
Advice to Senior Management: IBM has tendency to acquire new products and companies from outside and then blue wash it. IBM should encourage home grown product and tool innovation.
Pros: Compensation and benefits are solid, lots of vacation, good insurance, and I'm working with an extremely talented team.
Cons: The org structure prevents real work for getting done and there's constant pressure to help the company as it struggles. Despite promises and going above and beyond for my group, I've been blocked from promotion.
Advice to Senior Management: There has to be more buy in from mid level secs for design thinking, or products are going to continue to fail. Give your employees a chance to grow a little in their careers instead of treating them like replaceable cogs.
Advice to Senior Management: Figure out a way on how to lead technology again — or resign. Watson is totally incapable of delivering anything, and there are other systems that are years ahead (Google, Wolfram Alpha). All the talks are just the typical IBM way of selling inferior, incomplete, buggy systems with clever marketing and then blaming the customers for not delivering their part on the implementation.
“There’s no evidence of any way, shape, or form that there’s a shortage in the conventional sense,” says Hal Salzman, a professor of planning and public policy at Rutgers University. “They may not be able to find them at the price they want. But I’m not sure that qualifies as a shortage, any more than my not being able to find a half-priced TV.”
The real issue, say Salzman and others, is the industry’s desire for lower-wage, more-exploitable guest workers, not a lack of available American staff. “It seems pretty clear that the industry just wants lower-cost labor,” Dean Baker, the co-director of the Center for Economic and Policy Research, wrote in an e-mail. A 2011 review by the U.S. Government Accountability Office found that the H-1B visa program, which is what industry groups are lobbying to expand, had “fragmented and restricted” oversight that weakened its ostensible labor standards. “Many in the tech industry are using it for cheaper, indentured labor,” says Rochester Institute of Technology public policy associate professor Ron Hira, an EPI research associate and co-author of the book Outsourcing America.
The bad news is that with the exception of preventative care, the first $12,000 of medical expenses this year (and $14,000 next year) is completely out of pocket. It's really just catastrophic insurance; but, I'm grateful...before the ACA we couldn't have gotten private insurance, and the private insurance then available would still allow for us to be bankrupted in the case of a major expense like cancer. My strategy is to hope that the FHA funds stay in place, and then use them for Medicare supplemental insurance. -RA'd and Retired in 2012-
Also Cloud is a race to the bottom. Watson technology will be made redundant by other entrants that will come forth and dominate. IBM will not be able to compete with them. Like the city of New Orleans, it has serious, fundamental problems that need to be taken care of but ignored such as corruption and injustice. This is my opinion only. -foo-
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