While a recent discussion by the company's chief financial officer confirmed that a "rebalancing" of the workforce occurred during the second quarter at a cost of $200 million globally, there was no specific mention of any planned actions for the third quarter that began July 1.
However, there was one comment from Martin Schroeter on the brokerage analyst conference call, discussing the third quarter. As reported in a transcript by Seeking Alpha, he said, "When you look at some of the other dynamics and the third from a year-to-year perspective, currency impact, investments, workforce rebalancing, the third quarter profit trajectory looks a lot like the second." ...
"After 13 bad quarters it should be no surprise that it would be IBM workers that would be punished and not the executives. IBM is no longer known for innovation but disintegration," said Lee Conrad, national coordinator for the group, backed by the Communications Workers of America. ...
"At this time we do not know the full impact. We do know multiple locations are being hit in IBM GTS," he said, referring to Global Technology Services, one of the company's largest blocks of employees. The site mentioned in several postings was Boulder, Colorado.
"We also have reports that work is being moved to India and Brazil and the U.S. workers terminated," he said.
IBM has not responded to a request for comment. The company does not announce its job cuts and when it confirms them at all, does not provide numbers or locations.
But in that financial jargon the company did confirm that it is, and will continue to, shed and shift employees, while also hiring new people.
Specifically, IBM CFO Martin Schroeter told Wall Street analysts on its quarterly conference call Monday that the company took a $200 million charge for "workforce rebalancing."
Workforce rebalancing" is IBM-speak for layoffs, but it also includes other things that move workers from declining business units into growing areas like cloud computing, mobile, analytics (including Watson). ...
He also said that IBM is using some sort of "alternative labor models" to help keep costs down:
We remain focused on our cost competitiveness through alternative labor models, more aggressively shifting resources to higher-value offerings and enhancing our global delivery capabilities. ...
Phrases like "alternative labor models" can be a euphemisms for hiring contractors, offshoring jobs, hiring H1-B visa workers from overseas, or any number of things. (We've asked IBM to clarify all of this, and will update when they respond).
It was the thirteenth quarter in a row of which that could be said.
Of course, to hear CEO Ginny Rommetti tell it, it's still all part and parcel of her ongoing turnaround plan, which she maintains will see IBM exit 2015 a more valuable business than when the year began.
"Our results for the first half of 2015 demonstrate that we continue to transform our business to higher value and return value to shareholders. We expanded margins, continued to innovate across our portfolio and delivered strong growth in our strategic imperatives of cloud, analytics and engagement, which are becoming a significant part of our business," Rometty said in a canned statement.
While all that may be true, however, one thing Big Blue didn't manage to do is boost its sales or profits.
Selected reader comments follow:
Enterprise software is at a tipping point with emphasis on digital which requires a very people driven approach. There are very significant long overdue changes coming which will see a commoditized approach that delivers customisation something that will further hurt likes of IBM.
And its problem isn't sell-offs per se — those are just visible symptoms of a wider culture of "money right or wrong" (and "money for my share options") that came in when Lou Gerstner replaced John Akers in the 90s, and the bean counters took over from the techies. There's no money available for anything.
Pick any 10 grunt employees at random, and ask them how much real education they've had in the last couple of years, say — you'll be shocked at the answer.
There may be something in there worth salvaging — but it's not going to amount to anything under the current board, any board likely to replace them, or indeed the sort of middle management appointees that the culture fostered by the board produces.
The very few IBMers left that do anything useful or productive (the ones that have not yet been "resource actioned" outside India) form a demoralized team that have to struggle daily with incredible tight reporting requirements and project and service workloads that span what was previously spread across many more people. All this for an increasingly small salary and benefits in the name of corporate profits they know will never get to enjoy. And make no mistake, the Indian IBMers don't share the same culture and values that made IBM what it was in the past century; they see IBM as their springboard to their next job elsewhere. One with a higher pay and better benefits.
I can't see how this can turn into the company Trevor describes. Large scale computing? Where are the potential customers? The same ones that currently feel being ripped off by an IBM that is constantly trading local people with offshored resources to increase its profits at the cost of worsening service to its customers? The same customers that bet five years ago on IBM server hardware only to see it abandoned? The same customers purchasing IBM branded storage only to discover that it is a mere repackaging of someone else's product, only with an additional layer of overworked support staff?
And where are the products? Watson? The perfect death trap for the risk averse IBM: no customer wants to sign off a contract where they will be footing the bill to set up an incredibly complex system with no ROI guarantees whatsoever.
All I can see is IBM slowly fading into irrelevance and reducing itself to two almost independent companies: one a very small, highly profitable, cluster of captive mainframe customers (these will remain IBM customers literally forever). Another made of the small army of lawyers, this time specialising in patent licensing. But this part will not last more than 30 years: on the long term, IBM can't sustain any significant R&D investment if they can't turn it into profits outside patents, something they have been unable to achieve for the last 20 years.
Chief Financial Officer Martin Schroeter dueled amicably with analysts in the call - and the layoff word wasn't mentioned.
But Schroeter on numerous occasions talked about how IBM is hiring, is shifting workers around, and continues to rebalance as it continues to move more toward cloud, software, services and Watson supercomputer offerings.
On the hiring front, he noted:
"For example, we've hired over 2,000 incremental resources into our mobility practices and shifted almost 1,000 to analytics projects. The remaining profit decline was driven by the lower revenue on what is a relatively fixed cost base in the short-term. We remain focused on our cost competitiveness through alternate labor models, more aggressively shifting resources to higher value offerings and enhancing our global delivery capabilities."
Interesting terminology - "alternative labor models."
More lower-cost foreign workers hired through H-1B Visas?
The server sale to Lenovo helped cut headcount, but IBM kept rebalancing.
Consider that IBM posted a 13.5% drop in revenue to $20.8 billion in the second quarter and that net income fell 16.6% to $3.6 billion. Measure that against her reaction:
Our results for the first half of 2015 demonstrate that we continue to transform our business to higher value and return value to shareholders. We expanded margins, continued to innovate across our portfolio and delivered strong growth in our strategic imperatives of cloud, analytics and engagement, which are becoming a significant part of our business.
The marks of the transformation are that sales across every major IBM division fell last quarter. Rometty's excuse for results is that the company has entered new businesses that show promise. ...
In point of fact, the cloud computing and business analytics fields are among the most crowded of the efforts of the world's largest tech companies. In what is called the "cloud infrastructure services" sector, IBM will need to claw its way ahead of leaders Amazon.com Inc. and Microsoft Corp. and fight against other companies such as Oracle Corp. and Google Inc. for a barely modest piece of what is left.
Rometty's comments try to support her case that IBM's cloud efforts can grow quickly enough to offset the rapid fall in sales from its traditional businesses. As it turns out, the results show her efforts are not anywhere close.
Selected reader comments follow:
In the end, it doesn't matter. Her golden parachute is something like $1.5M per month for the rest of her life, use of all IBM assets: club memberships, jet, personal cooks for life, personal security guards for her and family. On top of this, she has over $150M in compensation to boot.
It doesn't matter how bad executives are, they still get theirs while the workers pay the price. Bye bye 10,000 US workers and another 40,000 around the world during this quarter.
Her predecessor, Sam Palmisano, seemed to spend much of his time haughtily belittling competitors. For example: He once said that Apple was a 'toy maker'. He stated that he believed Apple could never amount to anything because it simply made consumer gadgets. Now, this same Apple (with a market cap 3 times that of IBM) is being begged by Ginni to do deals with IBM.
In short, IBM needs outside blood to run the company and do away with IBM's notorious internal arrogance that's propelled them to 14 straight quarterly revenue misses.
It's time for her to go along with other executives, They have been there long enough only to fail consistently at making the mark. Their performance rating is a 4 - does not meet requirements and is on notice!
I'll commend her for at long last doing the obvious and ditching the 2015 EPS roadmap, though it was really too little too late. The years of meeting EPS at the expense of organic growth and strategic investment is what lead to 13 Q's of revenue decline.
IBM never had a layoff, but all that changed, I thought the announcement was a mistake, times have changed and so has IBM. IBM has had the best in leadership roles, unfortunately even IBM has to admit it made a mistake in their selection for a CEO. Time to get the company back on track, clean house.
IBM's Project Phoenix was designed to eliminate US-based jobs and hire cheaper workers overseas. This was done with intent and by design.
IBM is now reaping the "benefit" of getting rid of its US workers and trying to find cheap replacements in low-cost countries.
Below you’ll see the news spelled-out in red annotations right on IBM’s own slides. The details are mainly there but before you read them I want to make three points. First, IBM’s sexy new businesses (cloud, analytics, mobile, social and security or CAMSS) aren’t growing — and probably won’t be growing — faster than its old businesses are shrinking and dying. This doesn’t have to be. IBM could carefully invest in some of those older businesses and become a much better company and investment.
Second is something that doesn’t immediately fall out of these slides but I think it should be said: from what I hear IBM’s analytics sales (the very essence of its Big Data strategy) have been dismal. Nobody is buying. ...
Sadly, IBM has already lost the cloud and analytics wars, they have yet to be even a factor in mobile, and social is a business that IBM has yet to even explain how they’ll make money. Of all these new businesses that will supposedly drag IBM out of the mess it’s currently in only data security has a chance, and that’s if they don’t blow that, too.
Selected reader comments follow:
I don’t envy Ginni. She took over for Sam who had clearly set IBM up on this steady state path to profits based on a completely static future, meanwhile everything was changing. When Ginni first came in, shaking things up wasn’t really an option; IBM was doing well at that moment and changing a good thing (as far as investors were concerned) would have been heresy on Wall St. She was simply expected to carry the baton across the finish line with that ridiculous $20 by 2015 goal.
She’s definitely made her own mistakes but to some extent she's in a lose-lose situation that was being built years before she took the helm.
We all just feel like sitting ducks, regardless of skills, abilities and performance waiting for our one on one manager meeting to tell us that we are no longer required. We never have the proper skills such as industry certifications and the like because there is never any money for training but rest assured there are a bunch of internal free courses available that offer little or no value and would be worthless with any other employer.
And then there is the PBC process with a very small number of employees able to get a bonus or pay rise due to quotas so people work the bare minimum and if you are like me give up part way through the year after you hear other employees (your competitors who it is best not to collaborate or share information with because you might help them get your pay rise) have already done much better than and you will never “catch them” so best to save the petrol for next years PBC chase or just give up all together and do the bare minimum or start looking for another job.
So we are a company in decline and a workforce lacking motivation with no training, old skills and no hope of a pay rise or bonus unless we some how manage to outperform God during the year whilst looking over our shoulders waiting to be told we no longer have a job. Anyhow have to go my manager has organise a one on one meeting out of the blue – must have something important to tell me
Rometty was handed the turd but even so, she was part of Sam’s gang so she too has blood on her hands.
Couldn’t happen to a more ruthless team of executives.
Don’t let the money fool you; you're going to make a big mistake if you go there. Good luck and choose wisely.
I have decades of experience at development leadership level, but feel that the time spent at IBM was a waste and hindered my career, a stagnation of my abilities rather than increasing them. They are a spent force, and Ginni got the job since she was able to cut to increase profits, not a technology leader IMHO.
That all stopped when the EPS targets were created and my kids excitement at seeing the IBM logos turned into disgust at the company that was making their dad work 16 hour days and travel 75% of the time. My last year at IBM I did not get a day off, including weekends and holidays, until the 4th of July.
I hope your experience is like my first 10 years when I enjoyed what I did and felt like I made a difference.
Two events beginning back in 1970 led to IBM management becoming myopic. In the 80s, Ignoring the advice of those who recommended that all PC development (H/W and S/W) be done in house, added to that less than stellar vision.
Once Gerstner turned it into a “service company”, it lost even more of any vision that was still left. Now, unless you are in the inner circle, you are nothing more than a disposable commodity. If the project you work on is highly successful, you have a good chance of being retained for the next project. Otherwise, even if you were a stellar performer, you could be insulted by being told to train your replacement before you are shown the door.
There is also a good chance to be shown the door even if you were a good performer because management considers you are being paid too much. So if you decide to take the position, be sure “to keep your irons in the fire” so as not to be unemployed too long and best of luck.
IBM has lost its soul. Ask anyone who is working there today, or who has left in the last 10 years (and who have or had a soul themselves). They will tell you. Don’t be seduced by the immediate opportunity and think you will be unharmed by what’s going down all around you.
No vision, no values, no soul. It is sad, for a company with such a legacy. But it can be the source of some great business school analysis to counter the thesis that a company is all about delivering shareholder value, and that is what should consume senior executives 365 x 24. Also, a great example of how long a company its size can get away with financial engineering to look successful.
Morale stinks across the board. I still do my job, because I’m paid to do so and I’ve not yet found a workable alternative, but my enthusiasm for doing it well left a long time ago. My group looks “outward,” and in theory, we serve an external customer, but our only mandate is to please executives (internal stakeholders), who often are very out of touch, and when their ideas/policies/decisions don’t fly, they not only don’t take responsibility, but they lay blame at your feet for doing what you’re told.
We’re also under constant paranoia that the next RA (layoff) will include our number. A good many people have been set adrift for no other reason than cost cutting. A good rating, if you manage to snag one (my 1 last year cost me 55+ hrs/ week, and my reward was 1% raise), is no guarantee of continued employment either.
It’s demoralizing and sad. This place used to be awesome. Maybe it will be again. Good luck to you.
The upshot of running your business like this is that the reputation damage is fatal. Because of their poor performance on major accounts, IBM has not signed a major deal in Australia since 2010. And even more so, I’m told by my sources still within the company that they have been asked NOT to re-tender for business that are are currently contracted for.
I got out earlier this year and I pity those who are still there.
For this reason, serious stability and security incidents that 5 years ago would have had everyone on their marks, can now go on for months without anyone doing anything serious. It is just circulated among IBM incident handler and managers who are usually clueless about how the systems work. Only after high-level management pressure from the customer side is there any chance the incidents will even see an engineer. Oftentimes the incident managers will outright lie to the customers.
It also sucks to be an IBM employee, at least if you are an engineer with many other options. Meager pay raises (on top of an already below-market pay, cut bonuses and benefits. Also all the intranet articles are totally about abstract cloud and social ideas, making little sense to an engineer who might actually try to visualize how the ideas are going to be realized at the customer side, let alone how it might make money. But as I remember, Ginni said some years ago, that these big “arcs” make it easier to steer the company. Yeah, I am sure it becomes easier to manage if you just ignore all those annoying details and can live in la-la land thinking IBM will magically become competitive in the cloud and that IBM still has serious credibility with customers.
I think IBM has maybe 1-2 years with some chance to turn the ship. There are still many clueless management types at the customers who don't realize how bad it is yet (partly due to the IBM lies), and who will continue to buying IBM for some time. But sooner or later, even those drones realize who bad it is and new projects will be outsourced to other vendors. Soon after that, the old cash cows will either move or will disappear from the balance sheet as they are decommissioned. This is what IBM is already seeing, albeit at a limited scale. But if this accelerates, as it very well might, history from IBM and other companies shows that things can go down so quickly, that it is not unrealistic to think IBM might find itself bordering on bankruptcy within 1-2 years – just like in the 90s. The Q2 results, and the 13 quarters with declining revenue, is a stark reminder of that. If IBM thinks this is bad, just continue down the current road for 1-2 years… then you will see bad!
He reiterated the fact that cloud computing, big data, security, and other areas falling into the “strategic imperatives” category brought in $25 billion and represented 27% of IBM’s total revenue in 2014. By 2018, he said IBM is on track for these initiatives to generate $40 billion and account for 40% of sales by 2018, he said.
A week ago, GlobalFoundries took over this plant and another in Burlington, Vermont, along with the employees at each, 16,000 patents, a book of business with IBM's chip customers and a 10-year contract to supply microchips to IBM. It also gets $1.5 billion from Big Blue. ...
The loss of 2,000 people from IBM's payroll raises the question of whether Big Blue will still be Dutchess County's largest private employer. According to a report filed under an incentive deal, IBM had 6,370 employees in Dutchess as of the end of February.
Whatever the total as of last Wednesday, there are now 2,000 fewer. The company doesn't make public comments on its workforce deployment numbers. Its other Dutchess plant is in the Town of Poughkeepsie, where large computers, mainly mainframes, are made.
The transfer of IBMers means Big Blue is littler again, said Lee Conrad, who has tracked trends as a national coordinator for the worker group, Alliance@IBM. "In the mid 1980s, IBM had 230,000 U.S. employees. Now, with the latest move of IBM employees to GlobalFoundries, that number is around 70,600," Conrad estimated.
"Job cuts, offshoring and shedding of business units have decimated IBM employment in the U.S." he said, attributing the decline to IBM executives' chasing after earnings per share of stock regardless of consequences.
Generally, best was how to handle IDC Brno is hit and run principle: Come here for 2-3 years, learn new stuff, get some education if possible and then leave for much higher salary. If you stay longer, you will simply start losing money literally every month.
Advice to Management:
Accenture CEO Pierre Nanterme told The Washington Post that the professional services firm, which employs hundreds of thousands of workers in cities around the globe, has been quietly preparing for this “massive revolution” in its internal operations. ...
The firm will disband rankings and the once-a-year evaluation process starting in fiscal year 2016, which for Accenture begins this September. It will implement a more fluid system, in which employees receive timely feedback from their managers on an ongoing basis following assignments.
Accenture is joining a small but prominent list of major corporations that have had enough with the forced rankings, the time-consuming paperwork and the frustration engendered among managers and employees alike. Six percent of Fortune 500 companies have gotten rid of rankings, according to management research firm CEB.
These companies say their own research, as well as outside studies, ultimately convinced them that all the time, money and effort spent didn't ultimately accomplish their main goal — to drive better performance among employees. ...
Microsoft did away with its rankings nearly two years ago, attracting particular attention since it had long evangelized about the merits of its system that judged employees against each other. Adobe, Gap and Medtronic have also transformed their performance-review process. ...
“All this terminology of rankings—forcing rankings along some distribution curve or whatever—we’re done with that,” Nanterme said of Accenture's decision. “We’re going to evaluate you in your role, not vis à vis someone else who might work in Washington, who might work in Bangalore. It’s irrelevant. It should be about you.” ...
“Employees that do best in performance management systems tend to be the employees that are the most narcissistic and self-promoting,” said Brian Kropp, the HR practice leader for CEB. “Those aren’t necessarily the employees you need to be the best organization going forward.” ...
“The art of leadership is not to spend your time measuring, evaluating,” Nanterme said. “It’s all about selecting the person. And if you believe you selected the right person, then you give that person the freedom, the authority, the delegation to innovate and to lead with some very simple measure.”
Lately, though, the annual performance review has been falling out of favor in some quarters. Microsoft and Gap are among several companies that have reformed their evaluation processes in recent years. On Tuesday, the consulting firm Accenture, an emblem of traditional corporate culture if ever there was one, announced that it is getting rid of annual evaluations for its three hundred and thirty thousand employees, replacing the process with a system where managers will give feedback on a more regular basis. Accenture’s C.E.O., Pierre Nanterme, told the Washington Post that the existing evaluations are cumbersome and expensive. Plus, he added, “the outcome is not great.” ...
Anyone who has been given a negative performance review by a mean-spirited or incompetent boss will be familiar with this effect, but its implications go beyond individual dispiritedness. As James Surowiecki wrote last year, in a piece about the gender imbalance in Silicon Valley, “In a recent study of almost two hundred and fifty performance reviews, the tech entrepreneur Kieran Snyder found that three-quarters of the women were criticized for their personalities—with words like ‘abrasive’—while only two of the men were.”
Alliance reply: We need information on what accounts L1/landed resources are being put on and how many US workers are being replaced. We also need everyone to contact their Senators and Congressional rep and tell them what IBM is doing to U.S. jobs. To those senior managers in the know: don't you think it is time to come clean with documents that show what IBM is doing?
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