IBM fires small-town workers(theguardian.com) |
IBM fires small-town workers(theguardian.com) |
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 (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.
They're painting themselves into a corner - there are only a limited number of times you can get rid of the people on the ground actually doing anything before it really starts to hurt.
I think they've realised this and that is why they are now just buying companies rather than creating their own offerings.
Is it too late? Probably - they are only just getting their act together with cloud offerings whilst a bookshop has become a market leader. I dont think they can catch up.
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.
Nice one. I can say similar things about SAP.
Interesting, possibly related fact - SAP was started by former IBM employees.
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.
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.
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.
But I'm not even sure the most "fair" way to do that... what if you bring in a new CEO right as the mismanagement of the last CEO finally blows up the balance sheet? Wouldn't seem fair to the new guy to make him pay for it.
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 screwing it's hardware employees, but the writing has been on the wall for a very long time. IBM employees got used to the idea that they could work at IBM for life, and retire with the company. They've either missed the signals or felt like layoffs couldn't happen to them. Many of the groups affected by the layoffs in IBM had a furlough last August. I don't know about you, but the moment a company says don't come to work for a week with reduced pay is the moment I start looking for a new job. (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.
IBM is a market maker and there is no other company quite like it. It always feels unintuitive when they shift, but I expect them to keep on chugging along and continuing to innovate.
Some CEOs are like locusts. Moving from company to company for a short term frenzy, then moving on to the next.
I hope this is not happening here.
Personally I do not quite follow the current mentality of only thinking about the "shareholder value". If a company is just break even, it still pays earning the livelihoods of its employees. That should count for something - but of course is doesn't because investors can make more money elsewhere.
You could replace the IBM CEO every week for many years to come with someone who has been at the company for 30+ years.
(I left IBM 1.5 years ago)
I go to a college that is right next to the village Endicott. The population of the nearby city of Binghamton, a member of the Rust Belt, saw its population decline from a peak of 85,000 to its current total of about 47,000 when the manufacturing jobs left. The decline has taken it's toll on the city. Binghamton is now one of the fattest, most depressed cities in America.
http://www.syracuse.com/news/index.ssf/2012/03/america_fatte...
http://www.businessinsider.com/most-depressing-cities-in-ame...
The article suggests that shedding jobs equals not investing in the future, while also mentioning several paragraphs later that IBM is investing billions in new business areas. Increasing EPS means freeing up more cash to invest.
You don't. Increased opacity makes it harder to make any judgements. For example, IBM is quoted as saying they have "more than 3,000 job openings", but those could be pro forma openings which aren't expected to be filled, and exist mostly to promote the idea that IBM is hiring. The real test would be the number of people hired, but IBM does not publish that information.
The article does not say, as you believe, that IBM is "investing billions in new business areas". It says IBM "committed $1bn to its new Watson unit and $2.2bn to expand its cloud offerings". Those appear to be an expansion of existing business areas, and not an investment in new ones.
It also says IBM has "investments in areas such as nanotechnology which will bring hundreds of new jobs to New York State." IBM has been in nanotechnology for over 20 years, so you can't conclude from this article that this is a new business area.
Aren't they laying off in India now too?
IBM layoffs strike first in India; workers describe as 'slaughter' and 'massive' - https://news.ycombinator.com/item?id=7223582
When you've been with a company for 10, 15 years, you accumulate wealth of business knowledge that can always be re-deployed in other areas through careful planning.
That takes more skill than just swinging hammer. But with the absurd money we're paying the executives, shouldn't we expect a little more than just a hammer in their toolbox?
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 themselves are at fault.
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.
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?
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.