The clock is ticking on the second quarter for IBM and a number of employees are worried about "resource actions," quiet layoffs that largely go unnoticed.
Layoffs have been front and center as an IBM employee concern since April. IBM reported a disappointing first quarter and said it would move quickly to preserve profit margins and hit its earnings target. "By taking the bulk of our workforce rebalancing actions in the second quarter, we'll start to get the benefits from those actions earlier in the second half," said CFO Mark Loughridge. Typically, IBM has cut workers throughout the year.
Given it's June 18 and the quarter ends June 30, unions seeking to represent IBM workers are noting layoffs. Specifically, the Communications Workers of America have tallied 3,000 cuts and are keeping a running tab of units affected. We're getting numerous reports that IBM is cutting more workers than expected and global business services is a big target. The problem is that IBM employees don't have confirmation on the number of job cuts and whether there are 6,000 cuts or 12,000.
Needless to say the stress levels are rising among the IBM rank and file. An IBM spokesman said that the company's core competency and strength is transformation and that it needs to "remix our skills" to focus on segments such as social business, mobile, cloud and big data. IBM won't comment on specific restructuring numbers or percentage of workforce being trimmed. IT buyers need to monitor the situation given employee morale often affects delivery.
IBM's full statement:
IBM is investing in growth areas for the future: big data, cloud computing, social business and the growing mobile computing opportunity. The company has always invested in transformational areas, and as a result, we need to remix our skills so IBM can lead in these higher-value segments in both emerging markets and in more mature economies.
Change is constant in the technology industry and transformation is an essential feature of our business model. Consequently, some level of workforce remix is a constant requirement for our business. Given the competitive nature of our industry, we do not publicly discuss the details of staffing plans.
One thing is clear: IBM is looking to rebalance its business away from weak businesses and markets that don't hold a long-term payoff. Shortly after IBM's quarterly results, reports surfaced that Lenovo was interested in buying Big Blue's commodity server business. That move would free IBM to focus on higher-end integrated systems designed for cloud computing, analytics and big data.
It's possible that IBM would need to pare down its server unit before Lenovo was really serious about a purchase. Other likely areas for IBM to cut would be in strategic outsourcing where the Big Blue acquires assets and people from another company and then runs the infrastructure. Those deals, which often feature losses in the early years of an outsourcing agreement, are increasingly risky for IBM. Many of these job cuts would be overseas as well as in the U.S. For instance, Europe, Middle East and Africa workers are likely to get hit, IBM employees are saying.
In other words, IBM's cuts appear to be going beyond the usual sales, marketing and distribution targets.
The bottom line is that many IT jobs can be automated away and IBM is most likely looking to keep architects and cut data center integration and migration labor. As IBM moves more into cloud, analytics and big data it needs fewer workers---or at least a different type of employee.