back to article IBM to erase 14,000 people from the payroll – Wall St analyst

Up to 14,000 IBMers worldwide could leave under the latest redundancy programme, according to Wall Street moneymen. In a research note from Bernstein that was sent to customers and us, senior research analyst Tony Sacconaghi, said it appears IBM is taking “meaningful workforce rebalancing actions”. He highlighted a $1bn …

  1. Steve Todd Silver badge

    Stop me if I'm wrong

    But if you have a company with falling sales, and part of the reason for that fall is crappy customer service, then offshoring jobs is going to (a) do nothing to stem that and (b) demotivate the staff resulting in poor service. How can IBM management not spot the obvious?

    1. asdf

      Re: Stop me if I'm wrong

      > How can IBM management not spot the obvious?

      Are you an investor? If so let me just say stock buy back, stock buy back, stock buy back. Now lets talk about how rosy things look going forward for big blue.

      1. JennyZ

        Re: Stop me if I'm wrong

        spot on, lad.

    2. Anonymous Coward
      Anonymous Coward

      Re: Stop me if I'm wrong

      "How can IBM management not spot the obvious?"

      That's the problem, they do spot the "obvious". The obvious is that lowering costs maintains upper-management compensation and keeps the dividends high, both being the only things that Wall Street care about. "Happy upper management" = "continuing expected growth potential" and "high dividends" = "more investor returns".

      The exact methods use to attain both those targets are secondary. "Long term sustainability" is no longer a factor in American business decisions, it is all about the now. And "Happy Wall Street" supposedly means "Good Business", even if that is not properly correct and hurts the business in the future.

      Not to offend, but these incredibly short-sighted greedy American businesspeople fail to note that their actions are almost exactly identical to what brought Great Britain's magnificent industrial economy to a crashing halt: executives play Deck Chairs on the Titanic, patting one another on the back while keeping their incomes, whilst cutting every production corner and penny/pound possible out of the system, thereby cheapening the value of the product to the actual consumers.

      It is the "It can't happen here!" syndrome, no one bothers to look at history for constantly reoccurring patterns...of failure.

      1. Anonymous Coward
        Anonymous Coward

        Re: Stop me if I'm wrong

        The obvious is that lowering costs maintains upper-management compensation

        This is true. The sad thing is that US politician aren't asking the obvious question, and that is:

        "Hey! IBM senior management jerks! Why is it the case that your overpaid jobs aren't being shifted to some low cost third world shithole?"

      2. Munchausen's proxy
        Pint

        Re: Stop me if I'm wrong

        It is the "It can't happen here!" syndrome, no one bothers to look at history for constantly reoccurring patterns...of failure.

        Haven't you gotten the memo? Historians (and other liberal arts graduates) are fit only to pour your hipster coffee and supersize your fries.

        Real progress in today's world is made only by holders of Business degrees trying to cause and then hire cheaply from a vast oversupply of STEM graduates (or people who could plausibly be said to have STEM credentials).

        History? Bah! Who cares? If it was important, we'll discover it again.

      3. Fungus Bob

        Re: Stop me if I'm wrong

        "their actions are almost exactly identical to what brought Great Britain's magnificent industrial economy to a crashing halt"

        Oh, good. At least it will end (sometime) (hopefully soon).

      4. Peter Simpson 1
        Childcatcher

        Maximizing Shareholder Value

        ...where the only shareholders who count, are the top management and the investors.

        You see, they know the company's not long for this world. So, the name of the game is to grab as much as you can, before strapping on that golden chute and bailing...preferably with a sweet, sweet retirement package to boot. The employees? Well, they should have negotiated a better deal when they were hired, shouldn't they?

        1. Anonymous Coward
          Anonymous Coward

          Re: Maximizing Shareholder Value

          As I started this chain of thought: I came across this article today, dated 18 May 2015, which covers this very topic

          http://www dot businessinsider dot com/uber-cfo-because-we-can-2015-5

          Even (smart) businesspeople are beginning to realize the short-sightedness of this problem, but many companies continue to act blindly whilst heading towards the abyss.

    3. Anonymous Coward
      Anonymous Coward

      Re: Stop me if I'm wrong

      Yeah, you can say that to an IBM executive, but it is like having the "these go to 11" conversation from Spinal Tap. "We increased our net profit margins by x due to workforce rebalancing", "but your top line is falling so rapidly that it is going to over take any margin management gains", "but we increase our net profit margins".

    4. Yet Another Anonymous coward Silver badge

      Re: Stop me if I'm wrong

      >How can IBM management not spot the obvious?

      Cut staff - share price goes up - bonus based on share price, not increasing losses. = Obvious

    5. Bob Vistakin
      Pint

      Re: Stop me if I'm wrong

      Cheerio.

    6. Anonymous Coward
      Anonymous Coward

      Re: Stop me if I'm wrong

      The savings made from the reduced salary bill will show up in next years accounts as additional profits. At which time senior management will have rewarded themselves a big bonus and be long gone.

    7. Gigabob

      Re: Stop me if I'm wrong

      Management is responsible for force rebalancing decisions and as long as they inflate the stock price, which is how they are paid... stop me if I need to go further to complete the picture.

  2. Anonymous Coward
    Anonymous Coward

    @AC

    It's unfair to call them "short-sighted". They probably know *exactly* what's going to happen long (or medium) term and plan to have moved on- with their compensation safe and intact- before the **** hits the fan.

  3. Destroy All Monsters Silver badge
    Paris Hilton

    "lower labour cost countries"

    Hold on, these still exist?

    1. Gray
      Trollface

      Re: "lower labour cost countries"

      yes, Arkansas is one, surrounded by a few others. Not competitive with India for hi-tech, however, so no help there, but for Bangladeshi-style grunt-labor it remains very competitive wage-wise. Educational cut-backs in the K-12 area forestalled any hi-tech progress.

      Just sayin' ...

      1. asdf

        Re: "lower labour cost countries"

        Leave Arkansas alone. Where else you going to put the industrial size chicken coups and rice paddies in the US (yep the US actually grows rice)? Honestly though as anybody can tell you how has gone east on I40 across the US, Arkansas is actually quite nice compared to the asspit of Oklahoma you pass through before and the 3rd world city of Memphis you go through after.

        1. a_yank_lurker Silver badge

          Re: "lower labour cost countries"

          You mean there are US hell holes worse than West Virginia and Mississippi? The last I checked those two had the bottom 2 sewed up but that was awhile ago.

          1. asdf

            Re: "lower labour cost countries"

            As low performing rural shitholes yes. Ghettos where you get murdered in 15 minutes not as much. Parts of St. Louis for example are far more dangerous than any anywhere in either of those states. Just depends on your definition of hell hole I guess. Wouldn't take out a mortgage in any area mentioned so far though.

  4. Version 1.0 Silver badge
    Coat

    RE: "How can IBM management not spot the obvious?"

    You're looking at this the wrong way Steve - this is going to work out very well for the IBM management - salaries will go up, bigger bonuses and a nice retirement in the future. What's not to like about that?

    Companies like IBM are not run for the benefit of the customers or the employees (that's such an old fashioned idea) - they are run for the benefit of the management. Everyone else - stockholders included - are just chickens waiting to be plucked.

    Wait, did you say that the company will eventually go bust with these policies? Maybe - but upper management will have moved on to a another company by then.

    1. Anonymous Coward
      Anonymous Coward

      Re: RE: "How can IBM management not spot the obvious?"

      That has been the issue historically. IBM's management really didn't care about the long run as they (Palmisano and co) knew that it was going to be someone else's problem. Meanwhile they can jack their bonuses by buying back shares to juice EPS. It is the equivalent of a sales rep being able to find a way to lower their quota so their mediocre performance is always over 100%. It worked too.

      1. Version 1.0 Silver badge

        Re: RE: "How can IBM management not spot the obvious?"

        Exactly - you borrow money from the bank to buy back the shares, thus inflating the share price and then cash in your own shares and bail out, leaving the company to flounder under the added debt.

        The next big financial crash will be when stock market falls and the banks try to call in their loans only to find out that the companies are worth much less than the loan books. The government will then bail out the banks again because... after all, who could have seen this happening?

  5. Jim O'Reilly
    Pint

    iS THE MATH WRONG?

    IBM has apparently changed their layoff compensation policy so that many employees get 1 month's pay rather than the 6 months average traditionally given. $70,000 sounds more like the 6-month number, so if anything IBM will be hitting as many as 84,000 staff, based on the article's premise of the total amount to be spent in layoff pay.

    1. Anonymous Coward
      Anonymous Coward

      Re: iS THE MATH WRONG?

      In all likelihood the number crunchers have taken into account the fact that in some countries where IBM are letting people go, by law workers still have some rights and do still get an appropriate level of compensation. And perhaps, one hopes, included in this calculation is the reduction in the numbers of VPs and Senior VPs and so forth. Those people tend to have 'golden parachutes' that quickly jack up the average. So as an example, it may cost IBM approximately $15,000 to lay off a productive human being in say Florida, $50,000 to lay off another productive person in Australia where there are some protections, and $225,000 to get rid of a useless drone of a VP. That would average $70,000 across the three persons.

      Of course you can do the math, I can do the math, and if the drones could actually do the math (other than their bonus calculations) IBM might not be in this position.

      1. Anonymous Coward
        Anonymous Coward

        Re: iS THE MATH WRONG?

        "And perhaps, one hopes, included in this calculation is the reduction in the numbers of VPs and Senior VPs and so forth"

        Yeah, right. I've never heard of VPs and SVPs being laid off like the regular staff. Even when they do yet another massive reorg they structure it in such a way that there are plenty of senior positions left (look at how the Analytics unit was created last year, with a pointless division between "Platform" and "Solutions" that seems to have been done purely so they could continue to have both a SVP Analytics Platform and SVP Analytics Solutions in every geo, otherwise a lot of seniour managers would have had to been shown the door).

        If the 14k figure is based on historical cost of "eliminating" employees then I think it is certainly too low - there has been a concerted effort this year to cut the costs to the statutory minimum across the organisation. This is the move of a company that is planning a lot of firing.

    2. Anonymous Coward
      Anonymous Coward

      Re: iS THE MATH WRONG?

      The $70,000 is not just the severance. It is all kind of government expenses and other HR bureaucracy. Still though, yes, you are probably right that the numbers are understated. I would think the 96,000 layoff number over the last decade is a bit low, but in the ball park.

  6. hellwig

    It all comes 'round again.

    In 50 years, companies will look to reduce cost by shutting down facilities in expensive countries like India, China, and Brazil, and shipping those jobs to third world countries like the US and UK.

    I need a Tin Foil Hat icon for my posts.

    1. Anonymous Coward
      Anonymous Coward

      Re: It all comes 'round again.

      Pretty confident that in 50 years the bottom rung of countries will still be majority muslim and or in Africa. I am also confident even in 2 centuries Afghanistan will still be on the bottom. Of course you tend to not want to open plants in conflict zones so perhaps it will be the west.

    2. Anonymous Coward
      Anonymous Coward

      Re: It all comes 'round again.

      "In 50 years"

      In 50 years we will likely have more pressing worries: See http://www.bio.miami.edu/arboretum/wanless.pdf

    3. a_yank_lurker Silver badge

      Re: It all comes 'round again.

      @hellwig, Unfortunately you may be a prophet.

  7. jnemesh

    "You fired him?"

    "No, we just removed him from the payroll, the problem will work itself out..."

  8. Anonymous Coward
    Anonymous Coward

    Will the last programmer, please turn off the lights

    Not just IBM, all large multinationals (think banks etc..) do exactly the same.

    The UK It industry is being decimated.

    All experience gone to a lot of no-hopers in third world countries.

    AND they are being called high quality by management. You couldn't make this stuff up

    1. M.Zaccone

      Re: Will the last programmer, please turn off the lights

      Many of the large multi-nationals (e.g. IBM, HPE to name the most obvious candidates ) are already dead. They just haven't stopped twitching yet.

      Despite (or perhaps because of) redundancies, restructuring, mass offshoring and selling the family silver, many haven't grown their revenue in years. What you are seeing are the death throes of dinosaur organisations, and the creative destruction that leads to new growth elsewhere. Of course, that doesn't help the poor bastards on the shop floor who have done their jobs impeccably.

      There are plenty of IT jobs in smaller companies.

    2. Anonymous Coward
      Anonymous Coward

      Re: Will the last programmer, please turn off the lights

      Seems to be plenty of work out there right now based on the calls from the pimps i get? And this is coming from someone who's last role was offshored to the boys in Bangalore.

      That said, you really don't get the quality in India. Too many people get up the greasy pole too quickly so a 'senior' dev might be someone with a couple of years of Java experience. Managers were argumentative and couldn't organise shit. I had better experiences with offshoring to the Ukraine and China.

  9. Uncle Ron

    Focus

    Balance Sheet Engineering, or BSE, a term I just invented, has overwhelmingly replaced product engineering at the IBM Company. And not only at IBM. BSE at any company is a result of the infusion of massive numbers of MBA's pushing out an equal number of IT professionals, scientists and others who actually know something about the "B" that IBM is actually in. Those IT professionals who remain are not listened to and have little to no budget to actually do anything other than cut, cut, cut the remaining cost and expense of their current products. Of course, no new ones. Except from Marketing (more MBA's.)

    There isn't a seasoned IBM veteran, current or former, who would disagree that a small number of huge-ego executives, poorly equipped and badly placed, over the last several decades, is responsible for bringing IBM to it's knees. The company has been too clever by twice in trying desperately to whitewash over their careless, mindbogglingly stupid decisions in that time frame. The company should be run by computer science professionals, with nattering little MBA's tugging at the pants-legs or skirts, not the other way around.

    1. quite_remarkable

      Re: Focus

      Have a thousand upvotes for the 'Mad Cow' reference. Now just who could that possibly be ?

  10. Securitymoose

    So 'Last Decade'

    The management still don't get the true value of intellectual capital do they? It's about time they stepped down and let some real leaders take over. So many companies are pulling out of outsourcing deals, having been bitten. It'll only get worse as those far away economies implode. If you've got shares in IBM, now would be a great time to sell!

    1. a_yank_lurker Silver badge

      Re: So 'Last Decade'

      My employer, a multinational, tries to keep all key staff in house in all countries. Got burned years ago by trying to outsource some IT work and found it was overall wiser and cheaper to keep it in house. Most of my group is US/UK based.

  11. Anonymous Coward
    Anonymous Coward

    Govt Contracts and Offshore Staff a NO NO

    So IBM have both the MoD and the NHS payroll contracts. By law Offshore personal are not allowed to have or be permited any access to an environment that has or may have personal identifiable data. So does that mean the 20% ONshore users will be doing all the work orrr what you don't know doesn't hurt you.

    The latter appears to be the obvious answer but if it isn't then both the MoD and NHS both need to realise the service they have currently been receiving from IBM is likely to get a whole lot worse.

  12. thetruthofit

    IBM preaches to its managers and employees 9 areas of values that all employees are to embrace and champion. But then...IBM execs go to Interconnect in Las Vegas for a WEEK, spending all kinds of money, they get back, then announce lay offs, well they call them "resource actions". Wow..simply wow.

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