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."

Re:Thanks Cringely

[Anonymous Coward]

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:What the hell *is* IBM Global Services?

[Kadin2048]

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?

[lastchance_000]

When I was with them in the mid 90's, other companies outsourced to us. I assume that is basically still the case.

Re:Whatever happened to verifying sources?

[WindBourne]

ok; I no longer work at IBM (Watson lab work via boulder), but I talked to several of my friends at IBM-boulder (home of gsc). They say that there is to be a massive offshoring to India, Argentina, and somewhat even into Russia. I have been helping several others who are being laid off and were notified about 2 months ago that this was coming. They have been spending this time teaching new hires in India, Russia, and Argentina what their jobs are. The managers have told them that a BUNCH more are coming after this cut over. The middle managers are being told that their jobs are safe, but few are believing it.

Re:Thanks Cringely

[dreethal]

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:What the hell *is* IBM Global Services?

[beef curtains]

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.

Evidence?

[pooh666]

The only other story I can find like this is at CNN.. http://money.cnn.com/news/newsfeeds/articles/newst ex/AFX-0013-16392735.htm [cnn.com] But nothing else and certainly not with the whole of IBM's plan for the next year. They last layed off way more workers than this in 2002, so is this really that big of a deal in fact?

Re:Thanks Cringely

[dreethal]

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]

Cringely can't do math...

[sirwired]

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

IBM has succeeded!

[jskline]

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.

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

[recharged95]

There is the large Global Services dept that does basic IT support (like those IBM folks at our company). It's not the consulting people, but pure IT admins. It's a pretty large chunk of G.S. and though I wouldn't see it being 100K people (more like 30K), it makes sense for IBM to move away from that type of work in view that IT outsourcing is still moving at a rapid pace to Asia as well as firms like Accenure, Deloitte, and the rest of the Big 4 (are getting in the game big time).

100-150k layoffs? No way.

[FatSean]

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:Holy Outsourcing, Batman!

[Rakishi]

China has a lower population growth rate and birth rate than the US.

Re: Ouch.

[itsownreward]

I work for a not-for-profit healthcare organization. This has a few advantages:

1) Our IT department is sort of a black box. We maintain a lot of very esoteric software and systems that are purchased from vendors all over and are interfaced in-house.
2) Our management isn't always technically savvy; in fact, a lot of folks in our IT department isn't technically savvy (because they are often clinicians who moved over to IT to support an application or service here). To that end, they need the more technical people that we have hired. Thus, they lean on us.
3) Priorities change here constantly, so the odds of outsourcing us is small because we can react quickly. I write a lot of software at the last minute to fill a need that requires knowledge of our systems and configurations. Get that from an outsourced team in Bangalore.
4) People will always get sick, so it's not like our customer base will drop off.

What's sad is that it's used against us: we have the velvet handcuffs around here. We get four weeks of vacation (after the 90-day initial trial period of employment), pension and 401k/403b, decent benefits, and if you're really valued you get paid enough that it's hard to leave immediately and find another full-time position that pays as much.

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

[belrick]

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.

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

[tubbtubb]

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: Bad PR

[tubbtubb]

Yet, they don't seem to have a problem with the bad PR that something like THIS [cnn.com] might generate.
(near the bottom of the story)

Re:No surprise there

[HomelessInLaJolla]

OS/2 that flopped

OS/2 didn't flop. It was set up to flop. Microsoft correctly gambled that the lawsuits for releasing a defective product in the computer industry would be easily nullified since there was no real physical damage (as opposed to producing cars with a faulty braking system). With the support of politicians and investment bankers Microsoft was able to turn the general public into a host of free beta testers while IBM stuck to proper engineering principles and attempted to produce a refined product before unleashing it on the public.

In short--the public got chumped, and thirteen years later, we're still being chumped because the idiots at the tops of politics, investment, and banking won't admit that they royally f*cked up.

The bump in the middle of the rug must be pretty f*cking large by now... but everyone's been so carefully trained to keep their eyes focused on the corners.

Re:Presumably one would need those heads somewhere

[twilightzero]

Yup you're exactly right :) I also work for IBM as a contractor perma-temp and we've been seeing the writing on the wall for a LONG time. The sales force simply pushes products out the door, promising ANYTHING at all, even features that aren't possible, and selling the machines at a loss just to make the sales numbers. The support behind that, Global Services, is left holding the bag. And they too are forced to lowball contract bids to get the work fixing everything. I've been hearing whispers that many of the contracts are going to be dumped because they're not cost-effective - they were bid too low just to get the contract and they'll be dropped at renewal time. So yes, when you cut out a large portion of the contracts, you don't have a large portion of the work any more either. So you lay off workers and/or farm them out where the labor's cheaper.

The 'make someone else pay' Theory Of Econ.

[cmholm]

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.

Re:Thanks Cringely

[Red Flayer]

T-Bills have value because the US government always pays it's debts (so far). The dollar has dropped 25% but the value of US Bonds stays strong.

The value of US Bonds is dependent on the interest rate given on them. In addition, expectations of a weakening dollar reduces the values of US Bonds. US Bonds have the highest rating becaue the US hasn't welched yet, but the rating of the bond is only one factor in its value.

It doesn't matter what currency oil trades in, because if you have Euros, Pesos, or Yuan you're still going to use them to buy US assets.

Not really. If oil is traded in Euros, and there is expectation of a weakening dollar, investors will want to stay away from US assets (like T-Bills).

Say the rate right now is 1.0000. I spend 500 EUR, I get 500 USD worth of bonds. Say as those bonds get closer to maturing, they gain 1%. Now I have 505 USD worth -- but if the exchange rate is now 1.1, I've lost money, because that 505 USD is now worth only 459.09 EUR. This means that to foreign investors without dollars to burn (i.e., without petrodollars) T-Bills are a bad investment.

Re:Thanks Cringely

[terjeber]

'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.