Big job cuts coming at IBM? Don't be surprised :: The Skinny at WRAL Tech Wire

Updated Feb. 3, 2012 at 7:59 a.m.

Big job cuts coming at IBM? Don't be surprised

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By RICK SMITH, WRAL Tech Wire Editor

Note: The Skinny blog is written by Rick Smith, editor and co-founder of WRAL Tech Wire and business editor of WRAL.com.

RESEARCH TRIANGLE PARK, N.C. – No one working at IBM (NYSE: IBM), hoping to work there someday or following the company as the barometer of the global technology business sector should be surprised if Big Blue begins another round of layoffs in the near future.

To replace FTEs, or full-time employees, IBM reportedly is looking to hire contractors and temps, the Reuters news service says.

The goals: Cut costs and speed up project work.

“Internally the restructuring has been dubbed ‘Generation Open’ and staff that work for IBM on projects but are not full time are called ‘liquid players,’ according to an internal document seen by Reuters.”

So reads the news service report.

“With the move, IBM aims to accelerate the speed at which it completes projects by 30 percent and reduce costs by a third, according to the document.”

Reuters broke its story after the German newspaper Handelsblatt reported IBMers in that country faced “massive upheaval” with the Big Blue work force there being sliced 40 percent to 12,000 from 20,000. Bloomberg and Dow Jones picked up on the Handelsblatt report.

The trend to reduce workers in the U.S. and Western Europe in favor of adding jobs in lower-cost countries such as India, China and Brazil, continues.

Here are numbers for U.S. workers as compiled by Alliance at IBM, a union seeking to represent Big Blue employees (2011 and 2010 are estimates by Alliance since IBM no longer reports jobs numbers by country):

2011: *98,000
2010:*101,000
2009: 105,000
2008: 115,000
2007: 121,000
2006: 127,000
2005: 133,789

Earlier Hints: Code Words for Cuts

Anyone paying attention to Chief Financial Officer Mark Loughridge heard the first hints of big cuts when he discussed another year of strong earnings for IBM last month.
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“Now like all years, we're going to acquire and we're going to divest businesses,” he said. “We're going to invest in market opportunities and we're going to drive productivity where it's more challenging.

IBM's CFO Mark Loughridge

“We're going to rebalance our workforce to opportunities and skills aligned with our key investments and hire to drive in those growth initiatives.

“When you look at workforce rebalancing, I think it should be roughly consistent with what we've seen over the last four years. More specifically, I think, it would be more like 2010. Once again, if there's a charge associated to that, it would be offset above net income. But you put that all together, and I think we have a good hand as we enter 2010.”

IBM laid off some 10,000 people in the U.S. in 2009 and several thousand more in 2010.

Last year, some 100 people in the Triangle were cut as part of a wider restructuring.

In the January conference call (read transcript here), one analyst asked the CFO directly about “productivity enhancements” linked to offshoring.

“I know you spoke to productivity enhancements, but I'd like to, a, better understand what that is,” said A.M. Sacconaghi of Snaford Bernstein & Co. “Is that just a code word for labor migration, offshoring as a result of the headcount reductions you did at the beginning of the year, or what does it mean?”

The CFO responded with talk about “pull spend and drive productivity” and “structural takeout.”

“We're going to continue to work to spend reductions and productivity, much of that delivering within our services segment and drive value add in the customer engagement with assets, research and value-add approach,” he added.

IBM calls layoffs “resource actions,” but layoffs are layoffs no matter what kind of nice phrase the company uses.

As for “structural takeout” – watch out.

Big Blue likes to say that it is expanding its overall work force and hiring. True. Numbers are well above 400,000. But what IBM no longer discloses is how many people it employs where. By hiding that fact (it says for competitive reasons), Big Blue escapes harsh criticism about offshoring and outsourcing jobs.

IBM’s Shrinking Employee Footprint in NC

What impact have the continuing changes in IBM as a company had on its headcount in North Carolina?

Big Blue is estimated to have some 10,000 employees across the state.

In 2005, when the company celebrated its 40th anniversary as a tenant in RTP, IBM acknowledged having 11,000 employers in the Park alone with another 2,000 spread across the state plus some 3,000 contractors. The sale of its PC division to Lenovo had reduced that number.

At the height of the tech boom in 2000-2001, IBM employed some 14,000 people in the Park.

A lot of IBMers retire in North Carolina. The company said in 2005 that some 10,000 retirees called the Tar Heel State home.

Now it’s a good bet that there are more EX IBMers than CURRENT IBMers around here.

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Tags: IBM, Opinion Analysis

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