Grassley wrote a letter to IBM CEO Ginni Rometty recently seeking answers, and Bloomberg reported Tuesday that the company cut about 700 jobs in Dubuque, Iowa, where it opened a global delivery center in 2009. The Dubuque location once employed as many as 1,300 people, but had reportedly shrunk to more than 800 employees even before this year’s layoffs.
The layoffs follow roughly $50 million that city and the state of Iowa spent on incentives to lure the company. IBM didn’t comment on specific employment figures. “IBM is constantly investing in skills to meet the demands of our clients, especially in areas such as Cloud, Analytics, Mobile, Social and Security,” spokesman Adam Pratt told Bloomberg.
When money becomes the end, not the means, then the result is what analyst Gautam Mukunda calls “excessive financialization” of the economy, in his article, “The Price of Wall Street Power,” in the June 2014 issue of Harvard Business Review.
Even as the members of the C-suite are delivering less and less return on assets and on invested capital, the poor performance has yet to register in their paychecks. In the period 1978 to 2013, CEO compensation increased by an astonishing 937%, while the typical worker’s compensation have declined. These executives are administrators masquerading as entrepreneurs. As Bill Lazonick has documented in his recent HBR article, these executives are “takers,” while posing as “makers”: they are extracting value, not creating it.
Thus between 2004 and 2013, publicly-listed firms in the S&P 500 used a colossal amount of their earnings—$3.4 trillion—to buy back their own stock. These firms are engaged, Bill Lazonick’s article showed, in “what is effectively stock-price manipulation.” The consequences of these share buybacks are an economic and social disaster: net disinvestment, loss of shareholder value, crippled capacity to innovate, destruction of jobs, exploitation of workers, windfall gains for activist insiders, rapidly increasing inequality and sustained economic stagnation. ...
The C-suite has become “vampire talent” in the sense that they suck value from their organizations, their customers and from society, rather than creating it. They include:
1. Super-managers are people who hold administrative positions in the C-suite of private-sector bureaucracies but are masquerading as entrepreneurs. They are, to use Thomas Piketty’s slyly ironic term, “super-managers.” As such, they have been able to extract extraordinary levels of compensation. They have been lavished with stock and stock options and have been able to “manage” the share price of their firms with massive share buybacks and other financial engineering so that they receive massive bonuses. As Bill Lazonick documented in the September 2014 issue of HBR, the net effect of their activities is to extract value, rather than create value. A prime example is Sam Palmisano’s $225 million payout for his stint at IBM, while systematically extracting value from the firm for himself and the major shareholders over a period of years.
In April, Iowa Senator Chuck Grassley wrote IBM to condemn the firing of about 700 employees in Dubuque, Iowa. The same month, Missouri suspended tax credits after IBM’s headcount in the city of Columbia fell below the required minimum of 500.
When IBM came to Dubuque in 2009 and then to Columbia, it needed workers to help companies run their technology. Three years later a new CEO decided to automate some of the business, and the firings began. It’s a blow to Dubuque and Columbia, cities that spent a combined $84 million on tax breaks and other incentives to lure Big Blue in the hopes of attracting other technology firms and incubating a startup scene. ...
IBM declined to comment on the employment levels in Dubuque and Columbia, future plans for the locations or on the treatment of its workers there. “IBM is constantly investing in skills to meet the demands of our clients, especially in areas such as Cloud, Analytics, Mobile, Social and Security,” Adam Pratt, a spokesman for IBM, wrote in an e-mailed statement. ...
IBM’s Dubuque operation opened on Aug. 25, 2009, with a ribbon-cutting ceremony attended by local and state officials. The city and state had lavished more than $50 million in incentives on IBM, including a rehabilitation of the historic Roshek Building just off Main Street. Dubuque sent the company hundreds of resumes from potential recruits. ...
Chris Ross was one of the first people hired. She and other incoming employees anticipated learning high-tech skills on which to build a long-term career. In a January 2009 release about new jobs in Dubuque, IBM touted its commitment to work with local higher-education institutes “for recruitment and training of potential employees.”
Instead, Ross found herself toiling on what she described as a new-age assembly line -- each employee solving a narrowly focused part of a corporate customer’s technical problem and then passing the baton to the next person. As a result, said some of IBM’s Dubuque workers, they became experts only in a narrow set of skills that weren’t easily transferable. ...
Grassley, a Republican, wrote to Rometty on April 16 to express concern about “reports of mass layoffs” even as IBM requested H-1B work visas to allow 5,800 foreign employees to be authorized to work for the company in the U.S., he explained in an interview. “What are you doing to make sure you make a good faith effort to hire Americans?” he said. IBM declined to comment further on Grassley’s comments.
Lenovo, the world’s largest personal-computer maker by shipments, has presented itself as a nonpolitical, multinational company. It also has headquarters in Morrisville, N.C., and has promoted Western executives to senior positions. ...
After Lenovo acquired IBM’s personal-computer business in 2005, the State Department banned use of the PCs on its classified networks in the U.S. and abroad, The Wall Street Journal reported last year citing current and former officials. ...
Lenovo’s purchase of the IBM server unit was delayed last year by a review by the Committee on Foreign Investment in the U.S., a panel that screens deals that could have national-security implications. A U.S. Treasury spokeswoman declined to comment on whether restrictions have been placed on federal-government procurement of Lenovo or IBM servers, saying that information filed with the committee couldn’t be publicly disclosed by law.
In a short general statement, the company said: "IBM continues to rebalance its workforce to meet the changing requirements of its clients, and to pioneer new, high value segments of the IT industry." ...
"A decision has now been made to move the work carried out by IBM Greenock, specifically in the GPS team, to the global competence centre in Sofia [Bulgaria's capital city]. "This is in line with the continued focus on competitiveness and growth."
An IBM spokeswoman said: "IBM continues to rebalance its workforce to meet the changing requirements of its clients, and to pioneer new, high value segments of the IT industry."
The firm made this point in a letter to U.S. Sen. Chuck Grassley (R-Iowa), the Judiciary Committee chairman, in response to a query from the senator on IBM's use of the H-1B visa. ...
IBM said it brings in foreign workers who "who have specific profiles and expertise that we cannot source locally in a timely way to fulfill client requirements."
If it can't bring those skills into the U.S. "then our clients may be forced to move the work to the skills out of the U.S.," wrote IBM. The company also said that it "does not make a practice of cutting positions in the U.S. and then replacing those same positions with either U.S. citizens or foreign visa holders." ...
The firm's claims were met with skepticism in some quarters. Ron Hira, an associate professor of public policy at Howard University, said that 98% of the H-1B petitions that IBM had approved by the U.S. government from fiscal years 2008 through 2013 were in computer occupations, "the very same types of positions IBM has been downsizing in the U.S."
The median wage for those H-1Bs, according to the petition data, was $74,753, said Hira, "which is way below the average wages for those types of positions."
"We know that IBM is using the H-1B program to bring in workers who are being paid a lot less than the average wage," said Hira. "IBM is certainly not paying its H-1B workers as though they have specialized skills."
IBM cut its U.S. workforce as it grew India-based operations, but accurate numbers are difficult to get. IBM stop disclosing the size of the U.S. workforce in 2010, and its last officially reported headcount was about 105,000. The Alliance estimates IBM's headcount today at about 76,000. ...
The letter to Grassley offers "a lot of generalizations with no evidence, no specifics," such as a skills shortage, said Hal Salzman, a Rutgers University professor who studies STEM (Science, Technology, Engineering and Math) workforce issues. IBM is "entitled to keep data confidential but I would argue they are not entitled to ask for public benefits, government intervention into the market without providing some evidence for these claims."
Amazon Web Services towers above other global infrastructure providers in terms of the quality and breadth of its offerings, according to the research firm’s latest calculations.
Only Microsoft’s Azure nears the AWS juggernaut status in the boxy Gartner universe. Other established players, such as Google, IBM, VMware, Verizon and CSC, are all huddled far further down within the lower quarters. A few enterprise providers, HP and Oracle notably, aren’t in the box at all....
But what about IBM? IBM is progressing with the technologies from its purchase of SoftLayer last year for $2 billion. The SoftLayer offerings still aren’t integrated smoothly into IBM’s BlueMix set of platform services. Also, SoftLayer’s unique set of API’s for managing cloud workloads is still not widely supported by third-party management tools.
IBM has been addressing this last deficiency. Earlier this week, the company started offering the Open Stack cloud hosting software on SoftLayer, offering a way, in theory at least, to use the open-source software to manage workloads running on IBM’s infrastructure clouds.
Pros: Excellent salary, great work environment, a lot of excellent people working for IBM. Able to "define" your goals and make the job into what you want it to be. Get to work with some of the top companies in the world. Possibilities for domestic and foreign travel are always available. Exposure to great cutting edge technologies.
Cons: C-Level executives and Board seem bent on reducing or near elimination of USA work force. No longer a company that innovates and invents. Now just a company with deep pockets that buys new technologies, takes what it wants then discards the remainder. Time will tell if Ginny can hold IBM together or will be the one to sink the ship.
Advice to Management: IBM has more talent that it knows what to do with. Use your eyes and your brains and use the talent you have in front of you rather than do the old trick of making a surgeon out of a fry cook. Seems to be the case more and more often. Wake up.
Advice to Management: Respect and appreciate your employees. I can easily jump ship to Google, Apple, Amazon, or Microsoft. What are you doing to keep me here? IBM is going to have a very tough time keeping talent in Cloud and Mobile technologies if you don't start keeping up with the competition.
Set realistic expectations to customers for product releases. Rein in the sales and marketing guys that show off vaporware years ahead of where the product actually is. Focus more on quality and streamlining the development process.
Shift HR into a role of retainment, and not containment. HR doesn't seem to have any funding to be useful. Its only role appears to be to prevent IBM from being sued and to discourage unionization (like we're even going to bother unionizing; it's trivial finding another job).
There is a lot of talent at this company, and when we're motivated we can build great things, but that motivation is easily lost when we don't feel appreciated. The motivated employees will leave and the complacent ones will stay. Your choice.
Pros: A large company provides greater opportunities for advancement or to become a specialist. The projects and accounts I was exposed to were always rewarding and challenging.
Cons: IBM was so worried about what would happen if the employees formed unions. Additionally they had no loyalty at all towards employees who joined from an acquisition or outsourcing. In most cases they would find ways to speed up the attrition of these people.
Advice to Management: The off-shoring of jobs and the "good ole boy" network mentality of the management is not going to allow IBM to stay current and competitive. The bureaucracy in too many cases had us jumping over dollars to pick up dimes.
A couple of things of note: 1) All answers are being provided. Strange approach, but OK. 2) Last week we did agile. I found this one particularly interesting. Be agile, think differently — all good things until you stop and think about the approach IBM has taken with Lean.
Lean puts everyone in a well defined box. For the last few years all of our delivery teams have been boxed in to well defined compartmentalized roles. Great if you're building cars or toilets or hockey pucks. Not so good if you are dealing with technical thinking and intellectual services.
So now, we are intended to think outside that well-defined border. Presumably, constrained thinking and taking the dumb approach, i.e. don't think, just do, is not the most successful approach. Who'da thunk it, eh? Other than the agile presentation I do see value in these talks as I said. Whether or not our leaders actually mean what they say? Well, call me a skeptic. I'll wait and see. -rustyibmer-
Pretty stupid that people have to send you email begging to read the blog. If it was any good, people would be subscribed to it. It's all the same blah-blah-blah. It's daily entertainment seeing how lost the leadership in this company is, and how disenfranchised the workers are.
Please try to draw others to this site and ask them to read something worthwhile — the full transcript here going back to the latest RA, and ask them to join now before it's their turn to get screwed so that our execs can afford the latest status symbol McMansion or Tesla. -ItsATrap-
And the gall of IBM to say someone retirement eligible is retired (in IBM's definition) once RA'd. The reason is IBM wants early retirement for its resources or better (i.e. resignations, voluntary separations) just so their state unemployment premium rate doesn't go up which would hurt IBM profits. Retirement eligible is not RETIREMENT, IBM!
It is a form of age discrimination going on. The problem is corporate America and IBM have all the lawmakers, legislators, and even judges eating out of their hand. And it is all about IBM executive management pinching and squeezing the penny as tight as they can and still hang onto that blue cent over the employees heads. Ah, 'the time value of money'. Yep, for sure. -55IsTheNew65-
I am still waiting for expenses, commission and unused holiday payments...amazing that such a billion dollar company can hold back pittance amount. I actually loved working for the company except for the last year. My new FLM made my life unpleasant and I was left with no support. Went to HR but no help. Why would they help me? They are there to help the corporation! All in all the company is loosing its morality and the so-called senior leadership is getting greedier by the day. I hope the SLP see and hear and take action to change. But the I live in hope! -Anonymous-
Morale of the story: own your own career, Organize a union (that will solve many issues regarding outsourcing), but above all, invest in yourself and believe in yourself.
Outsourcing is a 50% scam. I led many teams overseas. Some were good but most were terrible, and nobody cared. It is all a numbers game. To be honest doing the same B.S. with North American workers would not save the company and may give us more jobs here momentarily but the company is spiralling down and no union can save it.
Best of luck folks. I share with you that I feel lighter walking now :). Leaving IBM Canada after 18 years. -LeavingAfter18Years-
Alliance reply: And we'd like to know what has stopped you and other IBMers from organizing and fighting for a union contract, that would stem all of the issues you have mentioned here? Every time there is an RA, IBMers visit our web site and say the same things about how badly IBM treats them. And it's always during or after an RA that our web visits go up.
What we need is a large membership that is willing to get out the word, *publicly*, that IBMers are done with this abuse once and for all. No one here cares about management looking in their mirrors. IBMers need to look in their own mirrors and decide that standing up to this company in large numbers, must be the answer, and IBMers must realize that it is up to them to change this situation.
East Fishkill is now being sold (in fact IBM is paying GlobalFoundries to take that division over) and those IBM employees are being sold off like cattle. I know some of them. Their future with GF is uncertain at best. Just how bad have things gotten when IBM was willing to PAY GF to assume ownership? And like cattle being led to slaughter they follow the line as they are told and do nothing. None of those I know ever joined Alliance.
My neighborhood is littered with ex-IBMers. All who saw the handwriting on the wall for years and did nothing. Now they whine about how it was IBM's fault for treating them so unfairly. And their role? Nothing. "You teach people how to treat you" IBMers have taught IBM they will accept anything and continue to show up despite being treated like property and numbers. RESOURCES!
Sixty-three new members. Sixty-three willing to take a stand. The rest still with their heads in the sand hoping someone ELSE saves their jobs. One neighbor who works in East Fishkill told me "I don't ever see them closing this place down." Trying to convince himself some level of job security existed. Well, they sold the place and now he is off to work for GlobalFoundries after 35 years with IBM. No thanks, no appreciation, no thought. Good bye, good riddance and add the cost of employing him back into the company's revenue.
What a pitiful ending to a once great company.
God helps those who help themselves. Only 63 IBMers are making the effort to help themselves. The rest have decided to do nothing and leave their future in Ginni's hands. Gee I wonder how that might work out? In the end, you get what you put in. Hear no evil, speak no evil, see no evil the new IBM motto. -Anonymous-
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