IBM to Lay Off Half of Global Services Division

Rolgar writes "Cringely says that IBM has begun massive layoffs in a quiet manner, starting with 1300 employees, but by the end of the year, the total will rise to at least 100,000 and probably closer to 150,000 employees, nearly 40% of their U.S. workforce. Some people will be temporarily retained as contractors at a fraction of their salary, and eventually, IBM will also dump many of the unprofitable customer contracts worked on by Global Services or outsource the work to Asia. If these people are looking for work, that could seriously drop wages for technical workers in the US since they will have to compete with these people for available jobs."

Thanks Cringely

I'll wait until I hear it from a journalist. No, you're not.

Re:Thanks Cringely

Yep. I'm not going to believe it until Dvorak writes an article about it.

Dvorak could say anything...

But there is a 60% probability that in his article Dvorak will recommend that Apple be bought or do the buying.

Unless he has already written that article this month. In which case, the probability drops to 40%.

India

Walk down any street in India and ask yourself: Why are people in India so poor? They are poor because their culture is extremely self-defeating.

Tell that to all of the farmers in India committing suicide [indiatimes.com] because they can't compeat with all of the heavily subsidized [financialexpress.com] produce from the US and EU. The same thing happens in South Korea and Mexico. People wonder why so many Mexicans come to the US as "illegal aliens". The reason why is US subsidized agriculture products and NAFTA. Because of the subsidies US agribusinesses can export to Mexico and sale it for less than Mexican farmers can grow the food for. This drives Mexican farmers off their farms and they go north to try to cross the border or they go into Mexican cities and those already in the cities are driven north.

Remember, Time-Warner bought AOL and immediately lost 88 Billion dollars.

WRONG!!! AOL bought Time Warner!

Falcon

Re:Thanks Cringely

I'll wait until I hear it from a journalist.

How about from an IBM employee? As far as I can tell, it's true. They just cut nearly half our team Tuesday, wtihout even notifying the customer (Who is going apeshit). And 40% is indeed the workforce reduction I've heard bandied about.

And I think Cringely has it right - this is largely being driven by Palmasano panicing over the stock price. It's barely moved since he's been CEO.

Re:Thanks Cringely

Sounds like they need to get rid of Sam Palmisano instead.

Re:Thanks Cringely

It's true of most corporations, but most certainly true of IBM that management never get touched. They really only did a management purge once that I'm aware, back in the early 1990s, and that was just middle management. It's a general rule that the incompetent CEOs get to completely fuck over the company in every possible way before someone finally figures out that they shouldn't be left alone to manage a Dairy Queen never mind a multi-billion dollar company. Part of that fucking up is to fire a good portion of your workforce, outsource them to India, demoralize the remaining workforce, have your projects then seriously compromized, your customer satisfaction go down the tubes and then watch a stagnant or downward-pointed share price now start some sort of nasty nose dive. Finally the board and the shareholders get all pissed off, fire you (which means paying you millions to vacate your office), and you head off to some other company and start fucking them over.

Re:Thanks Cringely

Even if they do get fired for fucking up, they get millions of dollars [usatoday.com] anyways. You walk away rich whether you're good or bad--where can I sign up?

Re:Thanks Cringely

The most important part of what you just said is that it doesn't take long for people to realize how screwed up the mass layoff was, and then a good portion of that 40% gets reabsorbed back into the machine. So people are worrying that these people will saturate "the market" but in all likelihood, firing half your workforce does absolutely nothing to teach you how to be 40% more efficient. Which means unless some radical transformation in management occurs (and as you just pointed out that's extremely unlikely), IBM will be just as inefficient before but now making 40% less of their customers happy and earning 40% less revenue, which means they'll go, "Oh, shit!" and have a mass hiring in short order.

As far as market saturation while they figure that out, you'd really need to take a look at the qualifications of these people and what work they are suited to as far as where they can realistically go to fill a job (where the employer agrees on their credential and pay level and so do they). Then maybe we could talk about the short-term impact of a glut of IT workers in those particular areas of IT, but again I predict it is just a transitory thing. And I suspect what some other people said is just exactly right. The perceived move to increase efficiency will drive up the stock in the short-term, some bigwigs will cash out, and then the reality of my first paragraph will set in and things will return to (normal - a couple hundred million in bigwig pockets).

And of course, flooding a market temporarily drives average salaries down, which means you can rehire your people at a 15% discount and thus you see just how it works. 100K employees * 15% ($50K median salary at time of layoff) * 1.5 year rehire loop = 1.125 billion dollars. If upper management did their homework, the revenue lost over the period is offset by the short-term float of the stock on investor optimism about the reorganization and there you go: about a billion dollars to spread around to the high rollers as they make a graceless exit, fat wallet in tow.

Digustingly clear isn't it?

Re:Thanks Cringely

Of course, massive layoffs never work. There are two kinds of employees--politicians and workers. The workers are too busy to see the boom come down, so they are the ones who get laid off. The politicians keep their eyes on the politics of the company, which means that they don't really have time to get much work done. They are really good at looking good--but not very good at actually getting work done.

Each time you downsize, you cut a disproportionate quantity of productive employees. Think of it as a crash diet; you waste muscle and increase the percentage of fat. This is why crash dieting is a good predictor of future obesity. It's also why companies that go through this binge/purge cycle become less and less competitive with each cycle. Look at Ford, GM, and Chrysler. How many times have they done this? My, now there's a success story...

Agreed. But Instead, they have $100k lunches:

Agreed. But Instead, they have $100k lunches: fiddling while Armonk burns [cnn.com]
(scroll down, or search for IBM)
I guess they could be buying it with their own money, but still, that's just bad PR in the middle of layoffs. a$$holes.

Re:Thanks Cringely

That's what happened at CompUSA... all the upper management we liked and respected (who seemed to care about the "grunts") all upped and left... by the time us on the front lines knew what happened and was happening, it was too late - though some of the uppers did try giving us hints...

Re:Thanks Cringely

How about from an IBM employee? As far as I can tell, it's true

This on top of the misleading jobs report released yesterday - which was still under the consensus by 20,000 jobs.

So, will we still be subjected to news stories about the horrible shortage of tech workers in the U.S.? Of course we will - because IBM is laying off well-paid older workers and looking to fill those positions in 6-12 months with cheaper, younger workers.

Hooray for corporate America. The only people getting paid well are the old white guys in the executive suite.

Re:Thanks Cringely

'll wait until I hear it from a journalist.

How about from an IBM employee? As far as I can tell, it's true.

I just wish people would do an absolute minimum amount of fact checking before they spread this kind of, quite frankly, garbage.

Firstly - I have no doubt IBM is laying off a lot of people, there is probably a need to in some areas. Layoffs are part of running any business. Some times a lot of layoffs will happen too. Trying just a little bit of basic maths first would be appropriate however. The numbers in this article are absurd.

As far as I know IBM has around 320 000 employees world wide and some 120 or so in the US. The layoffs this article are talking about are in the US, and they are only within the IGS part of IBM. IGS doesn't account for more than half of IBMs employees in the US, at an absolute maximum. That means that if you lay off the entire IGS division, you'd lay off some 50-60 thousand people. Where Bob gets the other 100 000 from is anyones guess. Perhaps they are laying off people in India and outsourcing those to China, and they are laying off people in China to outsource them to Poland.

Sadly sensationalism is more important than basic fact checking. The state of our current journalists is really, really sad. Cringely is at the very bottom of the heaping pile of dung that they call journalists today. Cringely is useful for little else than pirana food. Sadly I think that feeding Cringely to pirana would be cruel and unusual punishment, for the pirana.

Re:Thanks Cringely

Since Americans started getting squeamish about hearing the term "Massive layoffs". Sure, they aren't going to announce it to the world as such. Once the layoffs pick up pace (assuming this report is true) IBM will start touting the 'revenue improvement' due to the 'cost saving measures' of their 'recent reorganization' that coincidentally involved eliminating a bulk of their labor. Then, watch as stock prices soar on news of improved profit per share.

Re:Thanks Cringely

Since Americans started getting squeamish about hearing the term "Massive layoffs"

And I'd say this may mark the beginning of the end of the economic free-for-all in the US over the past decade. Rising unemployment will lead to the collapse of the mortgaged house of cards that is currently our banking situation, to be followed by the collapse of the dollar.

A huge announcement of these layoffs, followed by similar announcements by other companies in the coming months, would trigger massive sell-offs in the stock market, further exacerbating the economic situation as more capital flows offshore.

If IBM does it quietly, it may cause their stock price to rise a bit, instead of sparking a sell-off as overyone's fears about a collapsed US economy become self-fulfilling.

Re:Thanks Cringely

The dollar is already collapsing - it wasn't all that long ago when £1 bought only about $1.45. Now £1 will buy $2 - and there's every indication that the dollar is going to continue losing value.

This does at least insulate us from the rising cost of oil for the time being, since oil is traded in US$, and US$ is falling almost as fast as the price of oil is rising.

Re:Thanks Cringely

since oil is traded in US$, and US$ is falling almost as fast as the price of oil is rising.

Insulates you in Great Britain; doesn't insulate the US. Furthermore, we're very close to seeing oil traded in EUR or in a 'basket' of currencies. One of the primary reasons for the current war in Iraq was that Iraq was starting to sell oil in EUR (another was the hope that US control of Iraqi oilfields could have broken the back of OPEC).

If oil comes off the dollar, the US is even more screwed, since petrodollars will stop coming into the US, and other nations will have less reason to hold USD. Furthermore, there will be less incentive for countries like Korea, China, and Japan to buy T-Bills (which they currently do for a *negative* return once dollar depreciation is factored in) -- which results in them selling them off, which then causes the dollar to drop further.

All in all, there are several major factors currently propping up the USD, and if any one of them were to fail, it's likely the others would follow, resulting in economic disaster for the US, with much of the world to follow.

Note that depreciation of the dollar is a positive for USD debt servicing, which is a major reason why it's been allowed to continue. As soon as the US is forced to take it's debt in other currencies, however (which will likely be around when oil comes off the USD), then the US is in a world of pain.

As for me, I'm contributing to the problem by investing most of my money overseas -- but I can't accept the risk to my long-term investments by having them here in the US.

Re:Thanks Cringely

Americans get squeamish about massive layoffs, but investors certainly do not.

Re:Thanks Cringely

Americans get squeamish about massive layoffs, but investors certainly do not.

That's because "Americans" actually have jobs and work for a living, and are concerned that their job may be next on the chopping block, and "investors" can just shuffle their money from one investment to another without that concern.

It's a material event. Suqeamish doesn't matter

If IBM, a publicly traded-company, is planning on laying off 1/2 of it's Global Services division, you can bet your bottom dollar that that's considered a material event and they have to publicly disclose it.

Re:Thanks Cringely

IBM has been massively quiet on lay-offs for many years. It's just their style. It's bad for PR when it is that visible, let alone that it demoralizes the staff. IBM, through unofficial sources, has created ~70,000 jobs off seas while axeing a comparable amount (50,000) here in America. And that's before this latest round that we see today. The tracker is at http://www.techsunite.org/offshore/ [techsunite.org]

Re:Thanks Cringely

It's true. I'm soon to be out of my job at the end of the month, as well as the rest of my team (IBMers and (Perma-Temp) Contractors. My account was slated for transfer to Brazil in January and the talks started before that. We were expected to train our replacements who have basically been warm bodies. They're not even particularly talented. The rest of IBM Global Services is going the same way. So this is a VERY real thing. I was hoping to get hired on this year to IBM from being a contractor and that's shot. I'm just concerned given the massive offshoring that's occurring and how much this WILL impact IT. The displacement of this many workers is still going to have quite an impact on IT.

IBM has also implemented LEAN in effort to cut their IBM'er workforce in response to offshore outsourcing, which ironically is the very thing they're doing themselves. The survivors, although being survivors might mean they sorta wished they weren't. It's seriously bad. I'd suggest not touching IBM with a 10 foot pole. They're calling this the wave of the future... if they want to turn IT into something equated as fast food. That's the dream they're going for.

Check out http://www.ibmemployee.com/ [ibmemployee.com] . They have more news on the matter.

The sad part about the whole thing is that I enabled this to happen. I've spent my time there since day one migrating dying backup environments from Veritas Backup Exec and ArcServe IT to TSM and the resulting clean-up work. I am massively disappointed.

Anyone need a Arcserve / Veritas / Tivoli Storage Administrator ?

Re:Thanks Cringely

I've worked with enterprise customers that have IBM handle all their data center stuff. Every time a change needs to be made to do something like redirect a URL from websphere, it takes 6 people to be on the phone:

1. Person from our company telling people what to do.
2. Person from our customer that organized the call.
3. Person from IBM that can run a test through web sphere
4. Person from IBM to change the URL in webshpere
5. Person from IBM to change the firewall
6. Person from IBM to change the VPN

IBM has a bunch of people that know how to do one thing, and that is their job. The funny thing is, the people that know how to do their one thing aren't all that good at it. We went through this exercise 3 times. Once for dev, once for staging, and once for production. It took hours to do each time regardless of the fact that we did the exact same thing a week prior in one of the other environments.

I'm sure IBM has some good people, but I'd have to say I'd be swinging the axe too if my company got to this point.

Re:Thanks Cringely

"Employees face not only job loss but the indignity of training their off shore replacements."

i know how to handle this. tell your boss or manager AND/OR IBM to shove it. tell them you WILL NOT train the very person who is going to replace your job for the sheer means of satisfying the stockholders. if they want the cheap labor that bad, then let them figure out how to train them and pay for them to be trained themselves.. and try to do that from 5,000+ miles away. then let's see how they feel about offshoring.

That's a thought

or train them wrong.
I spent rwo weeks training my replacment how to write USB firmware...it's a shame we didn't do that.

100-150k layoffs? No way.

There are only 150k total IBM employees in the US. Cringely is talking out of his ass with that number.

I see you're a contractor systems administrator. I'm sorry you won't be able to come on as a full-timer, but your post seems to be a serious case of sour grapes. I mean...part of being a contractor is that your job is not guaranteed.

Re:Thanks Cringely

Anyone need a Arcserve / Veritas / Tivoli Storage Administrator ?

On the bright side, there are a lot of people out there who are of the opinion that IBM hardware and software is pretty great (although a bit pricey) but that their consulting stuff is what sucks. So the fact that you have experience with IBM systems isn't a bad resume line at all.

Personally I've always thought that buying PwC was a bad move for IBM, and they should have just consolidated down to their core strengths -- big iron hardware, the AS/400 series, pure research, microchips and processors, and intellectual property.

But still, I'm not sure I believe all this, because Sam Palmisano was a consulting/GS guy, not a hardware-and-systems guy. If anything, I'd expect them to be axing hardware (which is what they're really good at, but I never said I thought they were bright).

At any rate, IBM GS still has a lot of USG contracts, and those can't be outsourced.

Yes but...

That's the publicly announced ~1500 or so, it does not confirm a 40% US workforce layoff. 40% would be a ludicrously desperate move for a company that at worst is described as stagnant, not exactly in trouble. When you aren't announcing any losses, just less-than-awesome gains, it doesn't make sense to just cut out that much in as short a period as a year. IBM is topheavy and I definitely agree that the management is the bulk of the problem (not only *way* too many of them, but they are also more highly paid than the technical people who do real work), and so I wouldn't be surprised if a couple thousand more get screwed over the year, but 40% would be the dumbest thing and I think even shareholders would see it as a detrimental, stupid move.

One problem they do seem to have is startup envy. They see a company come out of nowhere and achieve great fame and a sizable market cap, and wonder why they can't achieve the same percentage growth. The obvious answer (that IBM's market cap is overwhelmingly huge already, nowhere to really go) doesn't seem to occur to them.

Where's your god now

heavily indebted McMansion owners?

Re:It's been said before but...

The guys who came up with outsourcing? I hope their jobs were outsourced.

I've often thought how nice it would be if there were laws passed saying that to be registered as a company in the U.S., you have to have X% of your workforce in the country. Or that executives had to be based in the same country as the majority of their workforce. See how interested companies are in outsourcing when it means they have to move to India.

Mismanaged...

I worked for IBM as a contractor and I'm sure for anyone else who has worked there whether as a full time employee or as a contractor, I am not kidding when I say they are highly mismanaged. I worked as a security engineer responsible for managed firewall services they were doing and I was extremely frustrated at the methods upper management handled things. We'd often spend an hour to two hours over the phone talking about nonsense and waiting for others to join in on the calls. Mind you I worked from home so IBM wasn't spending on me what they did for their normal employees. Whenever I had to head to Southington CT, I would see nothing but waste. I won't be crying for any one of those workers, that's the name of the game, making money. I only wonder why it took so long since this was inevitable anyway.

Re:Mismanaged...

You may, or may not, feel the need to cry for the IBM employees who are losing their jobs but better people to cry for might be the competent employees in the rest of the IT sector who now have to deal with a flooded job market. As long as they weren't fired for cause, their resumes look just as good as a competent employee's would. Even employed IT workers should be, at least, a little worried as the average pay rate stands to plummet and their higher pay rates become a liability to job security.

-GameMaster

Re:What the hell *is* IBM Global Services?

They do IT consulting, and make up one of the "Big Four", along with Accenture, BearingPoint (formerly KPMG Consulting) and Deloitte Consulting.

IBM Global Services is essentially the artist formerly known as PwC Consulting (which IBM purchased). PwC Consulting was formerly the consulting arm of PriceWaterhouse Coopers, and was spun off in 2002 in response to the Enron/WorldCom/Arthur Andersen messes & the introduction of the Sarbanes-Oxley Act (requiring auditor independence, separation of audit & consulting, yadda yadda).

Before IBM bought PwC Consulting, you may recall that it was on the verge of being renamed Monday.

Yeah, Monday.

Monday

Yup. They spent some huge sum of money to an advertising/PR firm, in order to come up with a name for this new, hot (well, they wanted it to be hot), consulting company. That's what they came up with. "Monday." Like, everybody's least-favorite day. The day you wish was always some other day.

And that's how they got called "IBM Global Services," which doesn't exactly roll off the tongue, but then again, nobody ever says, "sounds like a case of the IBM Global Services."

(Well, actually they might, but that's a different topic.)

Re:What the hell *is* IBM Global Services?

IBM Global Services isn't just essentially PwC. Before they bought PwC there was IBM Global Services which was formerly ISM (Information Systems Management?). Back then it was mostly IT outsourcing. With the purchase of PwC it grew to be business consulting too.

Re:What the hell *is* IBM Global Services?

Global stuff. You know. Like... increasing productivity through outside-the-box thinking and a fundamental paradigm shift.

Re:What the hell *is* IBM Global Services?

So what (in a nutshell) is IBM Global Services? What do they do?

It's IBM's consulting division.

In a nutshell, it's all of IBM except the parts with which you're probably familiar from the Good Old Days; it's all the business consulting, management consulting, logistics, etc.

What it's not is the remaining parts of IBM hardware; the AS/400 division, the mainframe division, software division (Lotus) etc.

I think Cringlely is dead wrong on all this -- in the past few years it's been Global Services and software that are really hauling everything else along. I think Hardware would probably survive on its own, as long as they could keep the IBM marque, but the money is in the service crap.

Re:What the hell *is* IBM Global Services?

The money may be in Services, but from what I understand a fair chunk of the profit is in the Software. One of the reasons Services exists is to pipe money to the hardware and software divisions...

It sounds like they're just dumping their Unprofitable parts of Services. If that's the case, they might be able to clean up. The Old Contracts and such are still likely to send money to IBM Software, and many of the people who are getting laid off, if they continue to do things in the industry, may continue to do things the way they learned, the IBM way, and keep sending money there as well. (You get to say "I can work with WebSphere!" It's a selling point for yourself that you're not going to just throw away. So your next client runs on WebSphere.)

Re:What the hell *is* IBM Global Services?

Moving forward, they leverage their intellectual capital in conjunction with the synergistic core competencies of a highly mobile workforce of motivated resources to manage global diversification, decentralize initiatives, and reduce inventory turnover in an increasingly risk averse marketplace. They operate on the principles of a paradigm shift away from participative management towards actionable strategic alliances. Quite intuitive, really...

Ouch.

Let's just hope IBM layoffs are a blip on the map and not a sign of things to come.

Then again, any IT person not in a critical role should always be planning (financially, professionally, and personally) for layoffs or reduced compensation. IT is not, and never will be, a constant line of supply/demand. If you want job predictability, be a farmer.

It's also interesting they are dropping unprofitable contracts. Imagine if someone like Dell did that. More than 5 calls over the same user issue? "Sorry, sir, please repackage your computer and return it to Dell for a prorated refund. We are no longer interested in maintaining this support relationship or maintaining you as a customer."

Re:Ouch.

IBM's customers are large companies... places that buy a dozen mainframes or thousands of cash registers. That's where IBM is loosing money. They won't "cut them loose" but rather rebid the contract with a nice margin of profit (to make up what they lost)... which the customer will readily refuse and go elsewhere. Motto: if you're in an industry against IBM... figure out how to make money from these guys IBM turns lose!!!! Many of these contracts are in the million dollar + range.. that can keep a small shop or consultant fed for years. HP, SUN, linux start recruiting the ex-IBMers for your service/sales departments. Much of what Global Services does is customer facing or back end support. The stuff that SHOULDN'T be outsourced... talking to customers and solving problems!!

Go with GCI, Ta-Ta, Sy People, etc

IBM is basically off-shoring their staff, and keeping their managers and execs. The problem is that is where all the waste is at.

OTH, the Indian companies are hiring American, but at lower pay. They treat the employees like cattle (presumably like they do in India) and have little to no benefits. But at least the management does not suck. The companies are able to make profits. IOW, it may be time to outsource the American managers who are terrible at doing their jobs.

Re:Go with GCI, Ta-Ta, Sy People, etc

>They treat the employees like cattle (presumably like they do in India) and have little to no benefits.

At least it is a country that worship cows...

It would be bad if they treat employees like cattles in Texas.

Re:Go with GCI, Ta-Ta, Sy People, etc

OTH, the Indian companies are hiring American, but at lower pay. They treat the employees like cattle (presumably like they do in India)

I doubt you could have chosen a worse way to phrase your uninformed prattle. You are aware of how Indians treat cattle, aren't you?

Re:Go with GCI, Ta-Ta, Sy People, etc

What, like my Indian ex-co-worker who bit into a piece of prime rib and said "mmmm.... god"?

Whatever happened to verifying sources?

Being an IBMer I was quite alarmed by this headline. But if you read the linked story, you'll see that Cringely is quoting his "many friends" at IBM.

That's not what news people would term a reliable source.

It's not to say that this might not be true but I'd like to hear it from something a little more reliable than Cringely's watercooler.

A fraction of the salary

9.8/10 is also a fraction. And please stop the alarmist protectionist crap.

Why First Post when I can....

Last Post!

(from inside my IBM cubefarm)

But, but, but. . .

if these people get laid off, won't that mean they can fill some of those supposed jobs that Microsoft et al keep saying they can't fill because there aren't enough qualified workers in the U.S.?

Won't that in turn mean that Microsoft et al won't need as many H-1B visas since some of the positions will be filled?

If Microsoft et al don't attempt to fill their supposed empty positions with some of these people, does that mean they are lying when they say they have all these open positions and no one to fill them and must look overseas for qualified people?

Don't Worry Guys...

...SCO will hire y'all with the cash they win from your former employer.

Cringely might be ignoring the long-term...

Lopping off half the technical staff, as Global Services is apparently about to do, will eliminate much of the company's traditional wisdom and corporate memory in an act that some people might label as age discrimination.

And others might label as cost-cutting, since the benefit of experience in a lot of positions is outweighed by the price of that experience.

Really, this is not surprising at all -- what is surprising is how many US companies are not doing the same thing. If the US were slated to remain the largest market for tech services, then it would make sense to make sure the workforce was largely American.

Now, I'm sure to be modded into oblivion, but I think it's important for tech workers especially to understand that they are likely replacable at a fraction of their cost -- and the more experience under their belt, the more this holds true.

Another thing not mentioned by Cringely is that IBM is also diversifying its employment base. Given the ticking time-bomb that is the US over-leveraged economy, this makes good sense for the long-term security of a company. I'd be shocked if other big international companies aren't thinking along the same lines.

Now, as for Cringely's opinion that this move is just to boost stock price, thereby enriching the current executive group, I think that's only part of the equation. It's easy to blame management greed for decisions that are unpopular amongst the rank-and-file. It's not so easy to understand that the stock market rewards moves like this precisely because they ARE good for the company. Sometimes it's a case of management simply making the best of a very sticky situation, when pain is unavoidable.

All that said, neither I nor Cringely know the full details, and so I'd take what either one of us has to say with a rather large grain of salt (and since I'm an unkown, two rather large grains of salt for me).

Re:Cringely might be ignoring the long-term...

If we are able to replace US workers for a fraction of the cost, then why aren't consumers able to shop from non-US corporations at a fraction of the cost?

You can. It's called Wal-mart.

Presumably one would need those heads somewhere

Let me first say I work in IBM outsourcing; SO actually. I work with this stuff. Let me also say that whenever wherever we can send a unit of work outside of the US we do that. But, one presumes there are those people 'over there' to do that. One can eliminate 150,000 jobs from IBM but at least some fraction of that, probably a large fraction of it, would have to be employed over in those other places to do that work, one estimates at a fraction of the US cost. And we are not seeing that level of growth over there. Maybe I'm too far removed from it or maybe I'm whistling past the graveyard but I'm not seeing that level of growth overseas.

Cringely can't do math...

150,000 would more-or-less be IBM's entire U.S. workforce, not 40% of it. If Cringely can't even get that right, I'd treat the rest of the article as extremely suspect.

SirWired

Total FT Staffing YE2006 was 356,000

That's from CNN. Also ALL H1B quotas through 2008 have in the US have ALREADY been filled. It would take an act of Congress to change that so clearly any company wishing to drag in more foreign labor can't. They have to send the jobs to them over there.

IBM has succeeded!

IBM has succeeded in pimping and prostituting the IT services fields, to the point now that they are soon to be going the way of the TV and Stereo repair shops. They could no longer get people to come in and work for damned near free and give all the money to the conglomerate IBM, so they will take it on the road overseas and use and abuse the various Europeans.

I saw the light early on with them and got out. I hope most of my friends still employed there are also seeing the light and finding the door before its too late.

Of course from what I know and what I am hearing, IBM didn't do that nifty of a job with their clients either. They bring in contractors and temps to do the services contracts and with such a high turnover of temps and contractors, how on earth can you seriously to expect that you'd ever meet SLA, much less keep your customer??!!!!

How can you expect IBM who only *hires* managers and team leads, and then brings on "temps" and contractors to do the actual work and *dirtywork* on the client site, to actually succeed?? The one customer I was at was sorely pissed at IBM many times over for many things. Some justified, some not. Almost all the justified reasons were because the only people to provide the legitimate valued service to the client were done by people who were good, skilled, and knowledgeable;... and quickly left the temp gig with IBM and their clients for a real full-time permanent day job elsewhere with benefits and all that comes with it. That usually left the the client rather lacking and pissed. I watched it many times and finally a door opened for me and I left. This is only going to get worse people.

Wake up and smell the economic sh** they are shoveling your way.

Let's be

Let's be honest here. I work in Global Services in South America. A lot of the accounts were way overstaffed and the people there were not exactly the best and brightest yet still getting 80K+ a year. I'm not a senior sysadmin by any stretch of imagination, but it can be seen from all 5000 miles away that my American counterparts are in no way superior to many of the seniors that I work with who have 10+ years of experience managing servers in environments where there's less money and you have to be more inventive to solve problems, and who've had to face even more difficult economic situations

Many accounts are overspecialized and action is held back by massive bureaucracy. Despite everything, my pet theory is that IBM simply can't support its massive managerial structure divided by a million differente criteria -accounts, competencies, etc.- , eventually it had to give way.

The 'make someone else pay' Theory Of Econ.

Does anyone at these corporations ever consider that by putting Americans out of work they're shrinking the size of their market? A little temporary boost in profits will be followed by a long term loss...

No, they aren't considering it. This behavior is straight outta a Marxist critique of market economics, where company A works to minimize their own labor costs, and counts on every other company to pay out enough to finance a market for A's goods... except that just about every firm is company A.

A classical Adam Smith economist will respond that the capital freed by (for arguments sake) IBM ditching thousands of employees can be more profitably deployed elsewhere by the Company and stockholders. Ex-employees, too.

A fly in that ointment is that nowadays, most of that capital is being redeployed out of the US, and it takes a while for the domestic economy to take up the slack with increased added value to crank the domestic incomes back up. Most US-based multinationals (if the Economist, Forbes, the WSJ, Biz Week, and my various stockholders reports are any indication) see their future growth in sales and headcount overseas. According to his latest financial disclosure statement, so does Dick Cheney. So, exactly how or when that increased domestic value is going to be created is an open question.

For the moment, the effect of the tide of money leaving the US is hidden by the Chinese and Japanese buying Treasury Notes to hold down the value of the yuan and yen. When that tails off, interesting things will occur. It's unlikely to be a meltdown, but it won't be pretty.

Sun did the same trick a few years ago

Laid off a large bunch of their Professional Services staff here without informing their customers. The customers pulled out the signed contracts asking who was going to fulfill them. By the time the dust settled, Sun had either lost a lot of people to other companies or had to hire the sacked staff back on at higher contract rates to fulfill the obligations.

What has the management been doing?

Seriously, whenever I hear about massive layoffs, the same question pops into my mind:

Why are the employees being punished when this is so obviously a management issue?

If the managers were doing their job correctly, then one of two things would of happened:
1) Either the projects would generate enough revenue to keep the current workforce, or
2) the workforce wouldn't of got "so large" that they need to cull it.

Call it cost saving if you will, but if I were working for IBM and got to keep my job, I wouldn't be turning up Monday. Or any other day for that. If these stories turn out to be true, I'll never buy something from IBM again. If IBM isn't being managed properly, get new managers, not cheaper staff.

I always thought IBM had built its empire on quality and innovation rather then being the cheapest.

Let Me Tell You How it Actually Works

Lets say you've got small project A. Small project A has 5 or 6 guys working on it. They've been working on it for years, wrote a good bit of the underlying system, know everything about it and can generally tell you exactly where the problem is if you call them with a problem.

Now you fire all those guys and hire a bunch of guys from Brazil at 1/4 the original team's salary. Even if the original team hangs around to train the new guys the new guys have to ramp up from scratch. Even if they're excellent programmers it's going to take them 6 months to a year to even get comfortable with the code, even with documentation in place. During that time the overall application design will get slightly worse as they try to implement new features in ways that don't fit in with the original application design.

In the mean time you've got 150 other tech companies realizing that people in Brazil will work for peanuts and they'll all move in to the country. Now your programmers are realizing that they can get more peanuts if they do the same sort of job hopping that we did in the 90s to get more peanuts. So over the course of the next year your team is replaced by new people who you have to pay a lot more money to and who are completely unfamiliar with your code base again. So now you're paying your Brazilians as much as you were paying your original programming team and they have no experience with your code base. Good job!

You can only save money that way if you buy into the fallacy that people are pluggable resources and experience counts for nothing. If you believe that then you can get as much done with a summer intern as you can with someone with 20 years of programming experience. Give it a shot sometime. And you can find a company that doesn't have that philosophy. I wouldn't want to work for a company that thinks I'm just a body taking up space anyway.

Re:Fuck you IBM

These are mainly services people, performing services for somebody. These somebodies are still going to need services even if it is not with IBM anymore. It is not like they are closing down a manufacturing plant; they are dumping customers, but these customers will just find someone else to do the work. Whoever picks up these contracts will probably need more employees. There will probably be net increase in unemployed people, but a portion much smaller than 100,000.

Re:Fuck you IBM

I don't understand why people get pissed when this crap happens. The company doesn't owe you a fucking favor. They hire, they fire, they do well, they do poorly. That's life. If you think it's "unfair", tough shit.

America has given many companies the fertile soil needed to create hugely successful businesses. Now these same companies have decided to take a big, stinky shit on that very same America, by offshoring everyone so that a tiny minority of people can go from super-ultra-rich to super-ultra-deluxe-rich.

If you don't see the problem with that, you're a moron.

Not all shareholders are super-ultra-rich

offshoring everyone so that a tiny minority of people can go from super-ultra-rich to super-ultra-deluxe-rich

If you think most managers don't deserve the salaries and bonuses they get, fine, I agree with you wholeheartedly. But the article says "The point of this has nothing to do with the work itself and everything to do with the price of IBM shares".

One usually thinks of shareholders as a mixture of Bill Gates, Darl McBride, and Steve Ballmer. Well, think again. I'm a shareholder of many companies and you are one too, if you have a pension fund, life insurance, or almost any form of investment. The point is that when you go to the bank and talk to your manager, your main preoccupation is how much you will get from your investment.

If you worry first about the social impact of the companies that make your pension fund and second about the financial results, well, kudos to you, but most people aren't like that. Maximizing a company's profits doesn't mean just making someone "super-ultra-deluxe-rich", it also means providing a decent retirement to people who have worked their whole lives to get it.