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IBM fires small-town workers

theguardian.com

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Re: IBM fires small-town workers

#31

Post by moonlighter »

mattdlondon wrote: post #16

I was previously an IBMer (not US based) until I left a couple of years ago, and I know someone very close to me who has just been offered redundancy from IBM (also not US based). I appreciate the company's responsibilities are to the shareholders, but their approach seems to be short-sighted. The culture in IBM seems to be if you are a sales person or a project manager you are the well-treated elite, and anyone else…

Ex IBMer here. They're not cutting the fat anymore, simply because there isn't much fat left to cut. It's mostly cutting into muscle and bone these days.

Spot on regarding their cloud offerings. The thing is, just owning Softlayer and Cloudant etc. doesn't magically make then a compelling player in that space. While they do have mindshare in corporate IT, they have less so with developers and hackers on the bleeding edge, and even less so in the startup scene. If you think "Database in the cloud" for example.. what comes to mind. DB2? Informix? Nope. More like DynamoDB, Redis, MongoDB, CouchBase and the like.

IBMers doing competitive analysis attending Amazon's re:Invent 2013 conference must've been virtually shitting their pants during every keynote speech.

Re: IBM fires small-town workers

#32

Post by hopeless »

I can't have been the only one to view the $1000 (or whatever it was) in stock options as a blatant bribe. It was pretty clear that the 2015 roadmap was going to sacrifice staff (or bonuses, or conditions, etc) in order to meet its targets and I honestly never understood what the motivation behind it was.

(I left IBM 1.5 years ago)

Re: IBM fires small-town workers

#33

Post by iends »

dalke wrote: post #29
iends wrote: post #28

Earlier quoted context omitted.

The job cuts were largely in STG and GTS and these are the divisions with the most dead weight, so while it's possible IBM cut non-dead weight jobs these cuts do not seem to be random across the board cuts.

Could you define "dead weight" in this context? Is it that STG and GTS were a net loss to the company, or is it that those groups weren't profitable enough to make the alleged $20/share goal? If IBM has decided to leave the hardware business as a long term goal, then is it fair to call the hardware people a "dead weight" if that part of the organization is still profitable? The term seems to imply that the people the…

I'm not sure what's alleged about the $20/share goal.

I do not know the income, off the top of my head, for STG and GTS, it's they made a profit, but revenue growth was negative. When you're trying to allocate capital for a business would you rather put your capital towards products with a 5% margin (hardware) or a 85% one (software)?

IBM has been pretty clear that they want to jettison the lower margin businesses in favor of higher margin ones. Maybe dead weight isn't the right term for these employees, but from a business perspective these low margin products are more or less dead weight.

Re: IBM fires small-town workers

#34

Post by RexRollman »

pcurve wrote: post #3

When your compensation consists of $500,000 fixed salary with bonus of $2 mil - $5 million, naturally you're going obsess over Wall Street numbers. I think executives should be penalized for layoffs, because with proper resource management, layoffs can be greatly minimized. In fact, EPS increase through asset sales, layoffs, stock buyback should all count against their bonus figures.

Corporate executive greed is a cancer that no one seems willing to cure.

Re: IBM fires small-town workers

#35

Post by moonlighter »

iends wrote: post #23
yeukhon wrote: post #4

To me, IBM is a dead company, no matter how cool Watson is. My perception of IBM is a consultant company. While IBM research still makes tons of awesome progress in AI and security, IBM looks like GE and Bell Lab to me. I don't know who is the legacy now... I wonder how IBM employees feel about their job.

IBM's Q4 revenue was $27.7 billion. The consulting branch, Global Technology Services brought in $9.9B of that revenue. The software group, SWG, brought in $8.1B in revenue. (IBM is only making ~33M per year on Watson right now) IBM is a bit more than a consulting company. They are in the midst of trying to reinvent themselves as more of a software company because the margins are so much greater than hardware. IBM is…

>> I do realize that many people at IBM stay loyal because they are on a pension program and they lose significant income if they voluntarily leave.

...or don't want to leave the (significant) severance package on the table.

Re: IBM fires small-town workers

#36

Post by rubinelli »

iends wrote: post #23
yeukhon wrote: post #4

To me, IBM is a dead company, no matter how cool Watson is. My perception of IBM is a consultant company. While IBM research still makes tons of awesome progress in AI and security, IBM looks like GE and Bell Lab to me. I don't know who is the legacy now... I wonder how IBM employees feel about their job.

IBM's Q4 revenue was $27.7 billion. The consulting branch, Global Technology Services brought in $9.9B of that revenue. The software group, SWG, brought in $8.1B in revenue. (IBM is only making ~33M per year on Watson right now) IBM is a bit more than a consulting company. They are in the midst of trying to reinvent themselves as more of a software company because the margins are so much greater than hardware. IBM is…

These numbers definitely don't tell the whole story. In my experience, the consulting branch is IBM's number one software sales force. Without it pushing products like DB2 and the Websphere line, the software group would have a tough time staying competitive.

Re: IBM fires small-town workers

#37

Post by dalke »

iends wrote: post #33
dalke wrote: post #29

Earlier quoted context omitted.

Could you define "dead weight" in this context? Is it that STG and GTS were a net loss to the company, or is it that those groups weren't profitable enough to make the alleged $20/share goal? If IBM has decided to leave the hardware business as a long term goal, then is it fair to call the hardware people a "dead weight" if that part of the organization is still profitable? The term seems to imply that the people the…

I'm not sure what's alleged about the $20/share goal. I do not know the income, off the top of my head, for STG and GTS, it's they made a profit, but revenue growth was negative. When you're trying to allocate capital for a business would you rather put your capital towards products with a 5% margin (hardware) or a 85% one (software)? IBM has been pretty clear that they want to jettison the lower margin businesses in…

I know only what I read in the linked-to article. I don't how important the $20 earnings per share is to IBM, that they might let off profitable groups solely to make that goal. Hence "alleged."

But "insufficiently profitable" and "dead weight" are not synonymous, just like "maximizing profit" and "greedy bastard" are not synonymous. The first of each pair are economics terms, the second are social terms.

To turn your question around, would you rather put your capital towards products with 85% margin or 75%? Does your choice of one make the other by definition a dead weight?

Re: IBM fires small-town workers

#38

Post by Spooky23 »

dalke wrote: post #37
iends wrote: post #33

Earlier quoted context omitted.

I'm not sure what's alleged about the $20/share goal. I do not know the income, off the top of my head, for STG and GTS, it's they made a profit, but revenue growth was negative. When you're trying to allocate capital for a business would you rather put your capital towards products with a 5% margin (hardware) or a 85% one (software)? IBM has been pretty clear that they want to jettison the lower margin businesses in…

I know only what I read in the linked-to article. I don't how important the $20 earnings per share is to IBM, that they might let off profitable groups solely to make that goal. Hence "alleged." But "insufficiently profitable" and "dead weight" are not synonymous, just like "maximizing profit" and "greedy bastard" are not synonymous. The first of each pair are economics terms, the second are social terms. To turn you…

The margin question is a good one, and you have to ask it in context of IBM. Nobody wakes up and says "Hey, let's go buy SVC for storage virtualization!". You go to buy IBM storage (lower margin) and layer on SVC and the other management software.

Think of a fast food scenario. The marginal cost of cheese on a hamburger is like 95% profit for a restaurant. That doesn't mean that you stop selling hamburgers for $1 and only sell slices of cheese for $0.25.

Re: IBM fires small-town workers

#39

Post by derefr »

mattdlondon wrote: post #16

I was previously an IBMer (not US based) until I left a couple of years ago, and I know someone very close to me who has just been offered redundancy from IBM (also not US based). I appreciate the company's responsibilities are to the shareholders, but their approach seems to be short-sighted. The culture in IBM seems to be if you are a sales person or a project manager you are the well-treated elite, and anyone else…

> The culture in IBM seems to be if you are a sales person or a project manager you are the well-treated elite, and anyone else (i.e. the researchers, the developers, designers, consultants - basically anyone who actually makes anything that IBM sells) can go fuck themselves and are treated as dispensable/replaceable assets.

That's a somewhat-sensible philosophy for a services company/consultancy (whose brand-name is its biggest asset) to take, though, isn't it? The only people IBM has to keep, to keep the lights on, are the salespeople (who introduce new customers) and project managers (who liase with current customers.) Everyone else is a black box that customers won't notice the replacement of. They could outsource everything but those people to subcontracting firms, and "IBM the services company" would persist.

Re: IBM fires small-town workers

#40

Post by derefr »

gaius wrote: post #18
mseebach wrote: post #7

Earlier quoted context omitted.

> with proper resource management, layoffs can be greatly minimized. This is a pretty bold assertion. We're not talking about a few jobs at the margin, eg. one report speaks of 25% of the hardware business.

No company hires just because. They have a plan and need people to execute it. If those people do their jobs well and still the company fails, then logically, you would keep the workers and replace the management. But it never seems to work like that.

Say that IBM had a plan that involved hiring 5000 pastry chefs. They did their jobs excellently, but it turned out that nobody wanted servers that baked doughnuts. Fire the management who came up with that stinker, or not, either way--but what good will come in keeping the 5000 pastry chefs?
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