
IBM fires small-town workers - jmsduran
http://www.theguardian.com/commentisfree/2014/mar/02/ibm-fires-small-town-workers-for-wall-street-numbers
======
mattdlondon
I was previously an IBMer (not US based) until I left a couple of years ago,
and I know someone very close to me who has just been offered redundancy from
IBM (also not US based).

I appreciate the company's responsibilities are to the shareholders, but their
approach seems to be short-sighted.

The culture in IBM seems to be if you are a sales person or a project manager
you are the well-treated elite, and anyone else (i.e. the researchers, the
developers, designers, consultants - basically anyone who actually _makes_
anything that IBM sells) can go fuck themselves and are treated as
dispensable/replaceable assets.

They're painting themselves into a corner - there are only a limited number of
times you can get rid of the people on the ground actually doing anything
before it really starts to hurt.

I think they've realised this and that is why they are now just buying
companies rather than creating their own offerings.

Is it too late? Probably - they are only just getting their act together with
cloud offerings whilst a __bookshop __has become a market leader. I dont think
they can catch up.

~~~
derefr
> The culture in IBM seems to be if you are a sales person or a project
> manager you are the well-treated elite, and anyone else (i.e. the
> researchers, the developers, designers, consultants - basically anyone who
> actually makes anything that IBM sells) can go fuck themselves and are
> treated as dispensable/replaceable assets.

That's a somewhat-sensible philosophy for a services company/consultancy
(whose brand-name is its biggest asset) to take, though, isn't it? The only
people IBM has to _keep_ , to keep the lights on, are the salespeople (who
introduce new customers) and project managers (who liase with current
customers.) Everyone else is a black box that customers won't notice the
replacement of. They could outsource everything but those people to
subcontracting firms, and "IBM the services company" would persist.

~~~
jedmeyers
If the company does not care about the quality of those services then I guess
they can do that. How long will the brand stay after that is a another
question. I would not bet for long.

------
pcurve
When your compensation consists of $500,000 fixed salary with bonus of $2 mil
- $5 million, naturally you're going obsess over Wall Street numbers.

I think executives should be penalized for layoffs, because with proper
resource management, layoffs can be greatly minimized.

In fact, EPS increase through asset sales, layoffs, stock buyback should all
count against their bonus figures.

~~~
mseebach
> with proper resource management, layoffs can be greatly minimized.

This is a pretty bold assertion. We're not talking about a few jobs at the
margin, eg. one report speaks of 25% of the hardware business.

~~~
gaius
No company hires just because. They have a plan and need people to execute it.
If those people do their jobs well and still the company fails, then
logically, you would keep the workers and replace the management. But it never
seems to work like that.

~~~
derefr
Say that IBM had a plan that involved hiring 5000 pastry chefs. They did their
jobs excellently, but it turned out that nobody wanted servers that baked
doughnuts. Fire the management who came up with that stinker, or not, either
way--but what good will come in keeping the 5000 pastry chefs?

~~~
gaius
When life gives you lemons, you make lemonade.

------
yeukhon
To me, IBM is a dead company, no matter how cool Watson is. My perception of
IBM is a consultant company. While IBM research still makes tons of awesome
progress in AI and security, IBM looks like GE and Bell Lab to me. I don't
know who is the legacy now... I wonder how IBM employees feel about their job.

~~~
iends
IBM's Q4 revenue was $27.7 billion. The consulting branch, Global Technology
Services brought in $9.9B of that revenue. The software group, SWG, brought in
$8.1B in revenue. (IBM is only making ~33M per year on Watson right now)

IBM is a bit more than a consulting company. They are in the midst of trying
to reinvent themselves as more of a software company because the margins are
so much greater than hardware.

IBM is screwing it's hardware employees, but the writing has been on the wall
for a very long time. IBM employees got used to the idea that they could work
at IBM for life, and retire with the company. They've either missed the
signals or felt like layoffs couldn't happen to them. Many of the groups
affected by the layoffs in IBM had a furlough last August. I don't know about
you, but the moment a company says don't come to work for a week with reduced
pay is the moment I start looking for a new job. (I do realize that many
people at IBM stay loyal because they are on a pension program and they lose
significant income if they voluntarily leave).

~~~
rubinelli
These numbers definitely don't tell the whole story. In my experience, the
consulting branch is IBM's number one software sales force. Without it pushing
products like DB2 and the Websphere line, the software group would have a
tough time staying competitive.

------
linuxhansl
Typical scenario: \- layoffs for short term EPS \- current pipeline continues
momentum for a bit \- CEO gets credited with great success... and moves on to
the next company \- then the "oh shit" moment, when the lack of personnel
becomes apparent

Some CEOs are like locusts. Moving from company to company for a short term
frenzy, then moving on to the next.

I hope this is not happening here.

Personally I do not quite follow the current mentality of only thinking about
the "shareholder value". If a company is just break even, it still pays
earning the livelihoods of its employees. That should count for something -
but of course is doesn't because investors can make more money elsewhere.

~~~
pesenti
The current CEO has been at IBM for 33 years while the previous one had been
there for 39 years... So no, these CEO don't move on to the next company.

~~~
alexkus
That's not quite the same thing.

You could replace the IBM CEO every week for many years to come with someone
who has been at the company for 30+ years.

~~~
pesenti
I understand. But IBM CEOs are just not the "rotating CEO" type. For most (if
not all) it was their last position before retiring.

------
walshemj
Rather like when the GMG (guardians parent) let those staff go in some of the
local press they own when the margins went down for local newspapers?

------
nimish
Killing itself for $20 EPS.

------
hopeless
I can't have been the only one to view the $1000 (or whatever it was) in stock
options as a blatant bribe. It was pretty clear that the 2015 roadmap was
going to sacrifice staff (or bonuses, or conditions, etc) in order to meet its
targets and I honestly never understood what the motivation behind it was.

(I left IBM 1.5 years ago)

------
BU_student
It's sad to see IBM gut its workforce in the very place it was founded, just
to increase its EPS.

I go to a college that is right next to the village Endicott. The population
of the nearby city of Binghamton, a member of the Rust Belt, saw its
population decline from a peak of 85,000 to its current total of about 47,000
when the manufacturing jobs left. The decline has taken it's toll on the city.
Binghamton is now one of the fattest, most depressed cities in America.

[http://www.syracuse.com/news/index.ssf/2012/03/america_fatte...](http://www.syracuse.com/news/index.ssf/2012/03/america_fattest_cities_us_binghamton_obesity_rates.html)

[http://www.businessinsider.com/most-depressing-cities-in-
ame...](http://www.businessinsider.com/most-depressing-cities-in-
america-2011-3#binghamton-ny-5)

------
mseebach
This sucks for the people concerned. But IBM's core responsibility can't be to
maintain comfortable jobs that aren't sufficiently profitable. The world has
changed dramatically and IBM hasn't changed with it. The longer you go without
shedding the dead weight, the more painful it gets, but you still have to do
it.

The article suggests that shedding jobs equals not investing in the future,
while also mentioning several paragraphs later that IBM is investing billions
in new business areas. Increasing EPS means freeing up more cash to invest.

~~~
dalke
Without knowing the breakdown of which units are being laid off, how do you or
the shareholders have the information to know if management is indeed
"shedding the dead weight" or is instead tweaking the numbers to meet Wall
Street expectations?

You don't. Increased opacity makes it harder to make any judgements. For
example, IBM is quoted as saying they have "more than 3,000 job openings", but
those could be pro forma openings which aren't expected to be filled, and
exist mostly to promote the idea that IBM is hiring. The real test would be
the number of people hired, but IBM does not publish that information.

The article does not say, as you believe, that IBM is "investing billions in
new business areas". It says IBM "committed $1bn to its new Watson unit and
$2.2bn to expand its cloud offerings". Those appear to be an expansion of
existing business areas, and not an investment in new ones.

It also says IBM has "investments in areas such as nanotechnology which will
bring hundreds of new jobs to New York State." IBM has been in nanotechnology
for over 20 years, so you can't conclude from this article that this is a new
business area.

~~~
iends
The job cuts were largely in STG and GTS and these are the divisions with the
most dead weight, so while it's possible IBM cut non-dead weight jobs these
cuts do not seem to be random across the board cuts.

~~~
dalke
Could you define "dead weight" in this context?

Is it that STG and GTS were a net loss to the company, or is it that those
groups weren't profitable enough to make the alleged $20/share goal?

If IBM has decided to leave the hardware business as a long term goal, then is
it fair to call the hardware people a "dead weight" if that part of the
organization is still profitable? The term seems to imply that the people
themselves are at fault.

~~~
iends
I'm not sure what's alleged about the $20/share goal.

I do not know the income, off the top of my head, for STG and GTS, it's they
made a profit, but revenue growth was negative. When you're trying to allocate
capital for a business would you rather put your capital towards products with
a 5% margin (hardware) or a 85% one (software)?

IBM has been pretty clear that they want to jettison the lower margin
businesses in favor of higher margin ones. Maybe dead weight isn't the right
term for these employees, but from a business perspective these low margin
products are more or less dead weight.

~~~
dalke
I know only what I read in the linked-to article. I don't how important the
$20 earnings per share is to IBM, that they might let off profitable groups
solely to make that goal. Hence "alleged."

But "insufficiently profitable" and "dead weight" are not synonymous, just
like "maximizing profit" and "greedy bastard" are not synonymous. The first of
each pair are economics terms, the second are social terms.

To turn your question around, would you rather put your capital towards
products with 85% margin or 75%? Does your choice of one make the other by
definition a dead weight?

~~~
Spooky23
The margin question is a good one, and you have to ask it in context of IBM.
Nobody wakes up and says "Hey, let's go buy SVC for storage virtualization!".
You go to buy IBM storage (lower margin) and layer on SVC and the other
management software.

Think of a fast food scenario. The marginal cost of cheese on a hamburger is
like 95% profit for a restaurant. That doesn't mean that you stop selling
hamburgers for $1 and only sell slices of cheese for $0.25.

------
drpgq
"Employees in the US, and in those small towns, also say they’re unhappy that
IBM is shrinking in America while outsourcing to countries like India."

Aren't they laying off in India now too?

~~~
fhars
You are probably thinking of Lenovo laying off the employees in the server
division they bought from IBM.

~~~
iends
IBM had a large layoff in india. IBM's india problems have been quite
interesting. See: [http://qz.com/173601/ibms-india-
problem/](http://qz.com/173601/ibms-india-problem/)

------
fennecfoxen
As opposed to doing what? Keeping these workers on board as an act of charity?
IBM operates for the benefit of its shareholders, not its employees; also,
water is wet.

~~~
pcurve
Layoff is a blunt instrument that swings in one direction, and cannot be
undone. It's easy, but it results in too much unnecessary casualties.

When you've been with a company for 10, 15 years, you accumulate wealth of
business knowledge that can always be re-deployed in other areas through
careful planning.

That takes more skill than just swinging hammer. But with the absurd money
we're paying the executives, shouldn't we expect a little more than just a
hammer in their toolbox?

