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IBM: Systematic Layoffs and the Concept of Selling Concepts

by Victoria Mack May 17, 2016 0 Comments

It's time to look at layoffs again. Also, contrary to what some analysts believe, a full-scale transformation of IBM into a company that sells concepts is not the answer.

It's been about two months since I wrote about the new round of IBM layoffs that could potentially see the U.S. workforce reduced by 14,000 out of approximately 70,000 employees. Since IBM of course doesn't publish its employee counts by country, it's hard to say exactly how deep each round of layoffs actually goes. There's a heck of a lot of smoke to be no fire.

I've speculated that this is more of a workforce rebalancing to move jobs from higher-paying to lower-paying countries. If you look at where the job cut reports are coming from (U.S., Canada, UK, Germany, Sweden, Belgium, Denmark), it makes sense.

On March 30, this article appeared on a number of German news media websites. In the absence of speaking the language, I ran it through Google Translate so you can get the gist:

IBM Plans to cut hundreds of jobs in Germany

Until March 2017 IBM plans to cut nearly 1,000 jobs in Germany, announced the union Verdi.

IBM plans in Germany apparently massive job cuts. The Group had informed on Wednesday about the planned reduction of nearly 1,000 jobs by March 2017 informed the trade union Verdi in a newsletter. Primarily affects service segments.

The group had invited the workers' representatives to negotiations for a social plan and balance of interests. In Hannover, a region should be shut down with about 200 employees, said a Verdi representatives. The Hanover stay but generally preserved.

No hiring freeze

"IBM has informed the participation and invited to negotiations," confirmed an IBM spokesman. A hiring freeze, it will not give: IBM will continue to hire employees with key skills.

For years, the IT group struggling with a decline in sales. IBM is in a time-tag, to be replaced by new one when the old segments such as the sale of servers or infrastructure.

Possibly further job cuts

Trade unionists feared already last year the job losses in the IT group in Germany. At that time there was talk of 2,500 jobs over the next two years. With the new announcement is not yet clear that it will not come to a further job cuts, said the Verdi representatives. Nationwide, the US group most recently employed about 16,500 employees. 2009 there were still 21,100

Still with IBM Germany, on April 25, approximately 200 workers gathered at a trade fair stop on U.S. President Barack Obama's visit to Hanover in protest of expected job cuts. While Obama spoke about European solidarity and the conflict in Syria later in the day, in the morning he spoke at the trade fair where the IBM protesters were congregated. Obama said “This is my chance to tell people come here and buy 'Made in America'," adding that he was "proud to showcase America's spirit of innovation." It's ironic that German technology innovators with a strong American business connection were just outside the doors looking to make a point.

This Associated Press story wasn't focused on the IBM protest. The protest was a minor news paragraph. The IBM protest part of the story wasn't picked up too much in Western media either, although interestingly enough it was covered by The Times of India. Given that IBM India employees make only approximately $17,000 USD per year and IBM now has more employees there than in the U.S., any IBM layoff in any country could be work coming down the pike to them. That's probably why this German protest is newsworthy for The Times of India.

It's also worth noting that in most of the titles describing the Obama two-day visit to Germany, specifically the trade fair event, most news websites don't mention the word IBM in the article title other than what the Associated Press picks as its up-to-the-minute latest title that gets pushed until 20 minutes later when the news piece has a new byline. For instance, the Times Colonist in Victoria, British Columbia, published the Associated Press story as “"IBM workers protest as Obama tours trade fair." If you now click the link to that article, you'll see the title has changed to “The Latest: Obama says US and Europe must help refugees.” It changes with the Associated Press content as the day progresses.

Interestingly enough, one news outlet changed the title.

The Times of India entitled their AP pickup “IBM workers protest as Obama attends trade fair in Germany.” That's why the story stops at 11:20 AM local time. The “in Germany” could've been a simple mistake addition of words. It is a curious coincidence that this is one of the few news pieces from that day with a title that talks about the IBM protest in Germany and still links to an article with that title, in a country where IBM appears to be growing despite an estimated 5,000 job cuts.

The other article I found with a similar title was out of China, which also has a relatively lower wage compared to U.S. workers overall. I could find no statistic on IBM wages in China vs. the U.S. The Standard in Hong Kong published a small piece entitled “IBM workers protest during Obama's Hanover fair visit.” IBM China had 18,000 employees as of 2008, approximately 5 percent of IBM's global workforce.

In poking around IBM Germany business, I came across a blog by Wolfgang Lonien, evidently an IBM Germany employee in Frankfurt who was at a different protest organized by labor union Verdi and took some great pictures to document it.

Selling Concepts

Also just announced was IBM's 16th straight quarter where they posted a loss. This is the worst quarterly revenue trend in 14 years. You have to wonder when the bleeding is going to stop. This transformation of IBM from a hardware, software, and services company into one that’s known primarily as an “as a service” company is taking more timeI believebecause most IBM customers don’t want this change.

I'm sorry. When you think “cloud computing,” you don't think IBM first. It's in the back of my mind because I'm close to IBM on a number of fronts. I even know about Cognitive Commerce, whatever that is. Cognitive what? I got a phone call yesterday from a sales rep who further provided information on this product via email. I have only a very rough idea what it does. The rep’s email said:

With Analytic solutions from IBM Commerce you can:

  • See what your customers are doing across digital and mobile channels
  • Understand your customers’ journeys, across channels and touch points
  • Identify trends on your digital properties and in your digital marketing
  • Capture and analyze social media opinions and trends about your business
  • Anticipate customer needs and prepare in advance to meet them

With Marketing solutions from IBM Commerce you can:

  • Quickly design and automate consistent cross-channel experiences
  • Make better decisions and deepen customer engagement with purpose-built analytics inside
  • Gain faster time to ROI and increased agility through a cloud-based digital marketing platform that integrates easily with other customer data sources and applications

I'm old-school for a guy on the right side of 40. I want to see exactly what value the products I buy will give me. What problem is the solution built to solve? Will I have good support on the other end of the phone? The principles of cloud, mobility, social, security, and analytics have always been a part of IBM business. They're in the products that they sell or used to sell. Contrary to what some analysts believe, a full-scale transformation of IBM into a company that sells concepts is not the answer. It's being pegged as a solution similar to the problem of adapting to technical innovations after the typewriter. In other words, they're looking for a solution to a problem that doesn't exist, and the revenue trend shows it.

Wholesale unneeded business transformation and a systematic workforce rebalancing leads to a dangerous drop in quality control, development, and overall support. I hope IBM realizes this before it's too late to pull the nose up.

About the Author: Steve Pitcher

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Victoria Mack
Victoria Mack

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