Deutsche Telekom will lay off 4,900 people from its T-Systems IT unit in Germany over the next two years, a Deutsche Telekom representative has confirmed.
The number of layoffs is smaller than initially feared, when rumours circulating last year reported that the company would cut up to between 6,000 and 8,000 jobs.
T-Systems provides consultancy services, mainly for larger companies such as Airbus, Phillips, and the insurance company Allianz. The unit employs about 50,000 people worldwide, with about 30,000 of those in Germany.
The move may set up a confrontation with labour groups in Germany. In January, after rumours about the job cuts emerged, Ver.di, one of the country's largest labour unions, staged a demonstration at the Detusche Telekom headquarters in Bonn in protest.
"Throughout this period, we intend to ensure that the resulting and industry-inherent staff restructuring takes place in consideration of social aspects," a Deutsche Telekom spokesman said.
By some accounts, T-Systems has struggled in recent years. The news magazine Der Speigel recently called the unit Deutsche Telekom's "problem child", noting that it "has earned very little money and has barely recorded growth" of late. And indeed, the layoff announcement comes at a time when the unit is shifting away from traditional IT services, such as support, to potentially higher-growth services such as provisioning cloud services.
"The T-Systems business model needs to keep developing in pace with the increasing level of digitisation," the spokesman said. "We will transform conventional ICT services, which are based largely on classic forms of outsourcing, into services that we can offer profitably on a lasting basis."
Beyond the layoffs, this strategic shift is evident in several high-profile partnerships that the unit has announced over the past several months. In February, T-Systems said it was partnering with Google so that it could begin offering its customers Google Enterprise products; and then at this month's CeBIT computer expo, the unit announced that it would begin offering Salesforce products through a new partnership with the CRM company.