Questionable Ethics in Restructuring IBM

Analysis of News Events
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Questioning the numbers, ethics, and morality of the latest round of IBM layoffs.


IBM has begun a new round of layoffs that could see the U.S. workforce reduced by 14,000 of the current 70,000 employees.


The news was broken by Bernstein analyst Toni Sacconaghi last week. Sacconaghi arrived at the 14,000 estimate with simple math. He noted that IBM historically followed large gains with cuts to the workforce. IBM has recently reached a $1 billion settlement with the Japanese Tax Authority, which was included on their 10-K report filed February 23, 2016. Since every job cut costs a company, in IBM's case $70,000, Sacconaghi divided the $1 billion gain by 70,000, which is about 14,285.


In an email exchange with InformationWeek, IBM Vice President of Communications Ian Colley stated that "the notion that IBM is laying off a third of its workforce, in the US or anywhere else, is completely outlandish and untrue." Colley mentioned that there are "25,000 open positions at IBM and a significant number of them are in the United States."


If one third of the workforce is outlandish, then what about 20 percent, which equals the 14,000?


Time for a little fact-checking.


As I write this, on the careers section of IBM's website, there are 7809 job openings worldwide for all languages. There are 2114 jobs open in the U.S., which is roughly 27 percent of the total.


At this time last year, when it was reported that IBM would be laying off (RAed, or Resource Actioned) one quarter of its worldwide workforce, IBM also came out with some outlandish numbers of its own. Then, "15,000 jobs were available worldwide." I did my fact-checking back then too and found 6,117 jobs worldwide and 2,042 available in the U.S. That's 33 percent on U.S. soil. That's a downward trend for U.S. jobs year over year. I don't need to buy Watson in the cloud to help figure that out.


I'd be more than willing to make an addendum to this article if someone at IBM would explain to me how those numbers work. If there are 25,000 jobs, I want to know where the other 17,000 are posted. I'll stick an edit right here.


Granted, companies advertise in-house jobs all the time without making them publicly available. If there are 25,000 jobs available, then that would mean that there are about 17,000 not published publicly. That's 69 percent. If you believe that, then I've got a bridge to sell you. Does that mean that there are 25,000 jobs available...including the jobs of people being RAed?


InformationWeek does some great fact-checking of their own. "IBM said that it had hired 77,000 last year. However, the year-over-year employee numbers reported in its 10-K filings with the US Securities and Exchange Commission show the headcount for total employees declined by about 2,000 between year-end 2014 and year-end 2015. IBM ended fiscal 2015 with 377,757 employees, according to the company's 10-K report filed with the US Securities and Exchange Commission, down from 379,592 in 2014. That means about 79,000 left the company during the same period, either in a layoff, a firing, or a voluntary departure."


So the way I read this, IBM's workforce changed by only 2,000 live bodies, yet 79,000 left the company and 77,000 were hired. That's some turnover. It would be great if IBM published their hiring numbers or workforce levels by country so you can see the levels in the U.S. drop and the numbers elsewhere rise. They're not going to do anything that foolish. You have to speculate. Leaked documents show IBM India now has more workers than IBM in the U.S. Why? Take a guess. The average IBM India employee is paid $17,000 per year.


What do IBM Philippines or IBM Mexico employees make per year? I may ask the next time I call for support and get routed there instead of somewhere in the U.S.


That has to be the saddest part of what IBM has become: service and support. Fifteen—heck, ten—years ago, you used to call IBM and have a highly qualified support person fix the problem for you. Fix it! I mean they'd do a screen share with an actual IBM product like Sametime and take control of your screen and solve the problem, all while giving you a bit of knowledge transfer so you can fix it the next time. You didn't have to send in gigabytes of server logs and have PMRs open for months at a time. I've had PMRs open so long that overseas support reps have actually changed jobs.


To be fair, the great service and support arm of IBM still exists. There are support teams that know their stuff inside and out. They're the ones who are currently being downsized, or RAed, or laid off in favor of sub-par, low-paid workers in other parts of the world.


While the shift has been to CAMSS (Cloud, Analytics, Mobile, Social, and Security) as a strategy, it seems that IBM doesn't realize what customers will actually pay for. A customer wants to buy competitively priced solutions, deploy them with ease, be able to call the vendor for help and reach someone who knows what they're talking about, and feel valued as a customer. CAMSS isn't a strategy. The components of CAMSS are fundamental 21st century pieces of what solutions should be incorporated with and what every single vendor is working toward achieving.


Because of that, CAMSS is actually a commodity. Say what now? Every tech vendor wants to enhance their products by making them cloud-ready, mobile-ready, social, tapped into big data analytics, and secure. There's nothing special about it. It's expected that, if I buy a security system for my house, I can log into it from a secure mobile app. I don't need to have a security system server in my garage either. I log into a cloud service to change my alarm code. What matters to me is whether the security system works and the level of the support I get from the vendor.


This layoff stuff is a sensitive subject because this isn't just about IBM. Shipping work overseas to the tune of shareholder value is a far too common form of corporate strip mining. We've all seen the video of United Technologies' Carrier Air Conditioner executives telling union workers their jobs will be relocated to Mexico. That's 1400 jobs gone from Indianapolis because it's less costly to do business outside the U.S. than to pay Hoosiers to do it. We all feel something because either we've had it happen to us or we know someone who's been laid off because it makes "good business sense" to move their job elsewhere.


Until IBM realizes that CAMSS on its own is a commodity, then things may keep getting worse for Big Blue. You need the products, the quality, and the service. You need your customers to believe in what you're doing. These resource actions make it hard to do so.


There are some really good people at IBM. The leaders need to be stepping up and answering the bell about these resource actions, openly and honestly. While you may not agree with Carrier's decision to move those 1400 manufacturing jobs to Mexico, at least they were up front with the workers about it. They manned up, looked people in the eyes, and told the workers face to face that there's cheaper work in Mexico. Ethically, it's valid. Morally, it's repugnant. Better one out of two.


But when you hear various reports about IBM severance packages being revised for the latest round of layoffs...what a kick in the teeth that must be. Imagine your severance being cut from six months pay to one. It guts me as a human being to hear about it. I couldn't imagine going through it. It's tragic when employees give decades of their life to build up a company only to have themselves and their work cast aside, replaced by foreign workers all in the name of shareholder value.


Steve Pitcher
Steve Pitcher works with iTech Solutions, an IBM Premier Business Partner. He is a specialist in IBM i and IBM Power Systems solutions since 2001. Feel free to contact him directly


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