IBM To Furlough Most Of Its U.S. Hardware Staff In Late August

http://www.forbes.com/sites/alexkonrad/2013/08/05/report-ibm-to-furlough-most-of-its-u-s-hardware-staff-in-late-august/

by dmm • 13 years ago

64 47 13 years ago

fiatmoney• 13 years ago

Hardware has been a loss-leader for IBM consulting services for a long time. Looking at the straight P & L for hardware alone doesn't make a whole lot of sense.

The real story is that IBM has been moving to 100% offshore & H1B labor for a while, and this is just one more nail in the coffin. In a decade or so I'd be surprised if they have any US engineers outside of their research division.

chflamplighter• 13 years ago

Last month IBM jettisoned entire STG teams and with this mandatory furlough one would assume others will decide to fly the coup. Couldn't blame them as I'm seeing a seller's market for those with hardware engineering skills.

rayiner• 13 years ago

So much for the shortage of qualified STEM people, huh, (at least if "STEM" includes electrical engineers).

x0x0• 13 years ago

why, it's enough to make a cynic think that all the ceos running their mouths about the "shortage" of software engineers (software engineer defined as someone in the top quintile of developers who wants to live in CA for far less money than available elsewhere considering COLA and will therefore struggle to afford a home and who comes in with detailed knowledge of the systems in place at future employer and does not require much, if any, training)... were merely concerned with reducing the bargaining power of the handful of people that meet their filter. Naw, couldn't be.

vonmoltke2• 13 years ago

Top quintile? Who lowered their standards?

mathattack4• 13 years ago

Some companies hire, some fire. As long as the hiring exceeds, there can still be a shortage. I know very few EEs that have trouble finding jobs.

vonmoltke2• 13 years ago

It took me over two years, and I ended up in a pure software engineering position. I couldn't get anyone to even call be back over EE positions, because everyone wants fairly narrow specialists for everything except entry level, college hire positions.

Spooky232• 13 years ago

A friend of mine is an EE doing something with chip production. Through a bit of bad luck, poor timing and lack of foresight, he ended up in a career cul de sac where he basically is stuck due to the technology that he is an expert in.

Basically, he'll get laid off in the next 2-3 years, and he'll need to start at a lower scale and work his way up again with another semiconductor company, or do something else.

jlgreco• 13 years ago

You could similarly say that RIM's troubles signal the beginning of the end of smartphones.

You could say it, but I wouldn't believe it...

chiph2• 13 years ago

IBM has forgotten that if they provide value to their customers, value to the shareholders will follow.

iends4• 13 years ago

IBM has also forgotten that great companies are built by the people they employee. Instead they are cutting benefits, hours, and are falling behind other companies, all in an effort to chase shorterm shareholder value.

johnward4• 13 years ago

It really does seem that everything is related to short term profits for share holders. Still chasing that $20 EPS even if it's not the right move for the long term.

tryitnow• 13 years ago

Not surprising. The company I used to work for bought tens of millions in HW per year, much of it from IBM. However, the future plans are to move to "cloud" solutions, which, of course, still require HW (difference being that the cloud vendor will own it), but the utilization of cloud HW should be much, much higher than our utilization rates, such that on net about half as much HW would be required.

Of course, we were really, really awful at managing our HW capex, so that may be an extreme example, but even if 25% less HW is required across many industries that's a huge blow to revenues.

mgaphysics• 13 years ago

Maybe my glass is half-full, but furloughing everybody for one week may have prevented them from cutting a number of individual positions completely. The thing that I find interesting is the statement about efforts being made to return the business model to sustainability: "new product launches, investments, acquisitions, changes to its go-to-market, new client centers of competency for Linux and flash memory".

Did I miss something or is this a list of things on any viable business model. I would have liked to see them make "out of the box" moves, but alas, this is the IBM we all know and love.

iends4• 13 years ago

IBM just have had a large series of layoffs. People have suggested IBM is trying to get more employees to quit.

twistedpair• 13 years ago

If you get them to leave, you don't have to pay severance. It's a typical maneuver to shake the tree before the culling.

chiph2• 13 years ago

They'll have another layoff ("Resource Action" in IBM-speak) later this year. No later than mid-December, so they don't have to pay the 401(k) match (if you leave before the end of the year, they take back their match for the whole year).

mathattack4• 13 years ago

Is this part of a larger issue of the company shrinking? http://www.forbes.com/sites/petercohan/2013/06/14/as-it-shri...

My perception is they give a lot of money back to shareholders while milking long standing businesses. I would think aggressive cost cutting is normal for them.

hvs2• 13 years ago

It would seem to me (i.e. someone who knows none of the details of IBM's internal business) that if IBM is so sure that its mainframes are so much better than using "cloud" services, then they should be building a cloud solution on those mainframes to compete with the Amazons, Microsofts, and Googles of the world. It's really not that different from the lease model with their mainframes (which they invented, I believe) and they would actually make their systems somewhat relevant again.

But I'm sure that I just grossly oversimplified the problems that they are facing.

snom380• 13 years ago

For mainframe customers like banks, stock exchanges etc, running "in the cloud" is just not an option due to availability and security, so pushing mainframes as a cloud service doesn't make much sense.

iends4• 13 years ago

This is why IBM is betting on the private cloud.

duaneb• 13 years ago

so pushing mainframes as a cloud service doesn't make much sense.

I find this hilariously ironic.

iends4• 13 years ago

IBM is betting on the private cloud, that is, companies running their own AWS type system internally.

hvs2• 13 years ago

I guess my point was that the advantage of the cloud is that you can start small and scale as needed. If you have to buy the whole cloud yourself, you don't really get that advantage of it.

thereallurch2• 13 years ago

http://www-03.ibm.com/systems/z/solutions/cloud/

They are. IBM's mainframe business is quickly becoming a dinosaur, cloud or not.

The furlough is a way to prevent another round of layoffs. By furloughing a division, you can save X%. You cant have two rounds of layoffs within 3 months and not destroy existing projects.

ams6110• 13 years ago

People have been calling mainframes "dinosaurs" since the 1990s at least. They still keep selling. The mainframe division was the only hardware division that is still showing growth, according to the article.

rst• 13 years ago

What IBM's mainframes do directly, and what the sales guys do push aggressively given half a chance, is what's now called "private cloud": hosting virtual-machine instances which can be quickly provisioned or shut down, on hardware owned or rented by the customer. This is what Amazon reportedly just sold to the CIA, for example.

As to experience, the mainframe guys have been doing "private cloud" on a small scale since the early 1970s, via VM/370 and its successors. Current versions can easily host dozens of VMs on a single hardware machine, running several guest OSes, including Linux.

Spooky232• 13 years ago

The big impacts are in North Carolina, Minnesota and Austin. They are the engineering centers for the x86 servers (commodity, nobody wants high end design in these anymore), and the pSeries (AIX/POWER) and iSeries (AS/400) stuff. All of these are dying businesses with declining market. The AIX line got a boost for a few years with the demise of Sun, but the trend is away from Unix to Linux.

Mainframes are a different animal -- that HQ is in NY. Supposedly they are making money.

dsr_• 13 years ago

Cringely called this a few months ago: http://www.cringely.com/2013/06/20/ibm-to-customers-your-han...

Yhippa• 13 years ago

Wow. I lost a half-hour going down the rabbit hole of the projects he mentioned in that article. I know there are two sides to a story but when it gets out into the news like that (especially the one involving the City of Austin) that's real bad.

thereallurch2• 13 years ago

This furlough is an attempt to prevent another round of layoffs. Another round of layoffs would cause IBM to reconsider which projects are necessary and start eliminating projects as a whole.

30% pay for 1 week of a 52 week year works out to 0.5% of your salary. It could be worse...

fu9ar• 13 years ago

Now they can all go hang out with the Googlers at Burning Man :)

forgotAgain2• 13 years ago

IBM's hardware division had a 35% profit on sales in the last quarter. In most businesses that would be considered tremendous. Unfortunately for IBM employees its not enough to drive up the stock price. That's the only decider. That's what's driving the stock repurchases and the layoffs. Meet the EPS goals set by management so they get their bonuses. Short term planning rules.

Mainframes are a growing business. They're failing with their Unix boxes, same as Oracle. They can't compete with Linux. The other area where they are failing is in sales of retail systems. E-commerce and iPads are killing their intelligent cash register.

mrkodiak• 13 years ago

IBM sold its retail systems business last year.

I left IBM STG middle of last year. In the span of about 6 months, half of my former department either left IBM or transferred elsewhere in the company. In the latest rounds of layoffs, I was surprised at how many good people (but middle aged) in the larger organization were dumped, and how some bare some areas have gotten (100,000's of code falls on 1 or 2 people).

forgotAgain2• 13 years ago

You're correct on the Retail Sales Systems. I misread their Q2 earnings report at http://www.ibm.com/investor/?lnk=fif-inve-usen . The report, page 3, talks of decline in sales excluding Retail Sales. I didn't take that to mean they sold off RSS.

jgalt212• 13 years ago

Is IBM stock a shorting opportunity here?

jmsduran• 13 years ago

Former IBM'er here. I worked in Power Software Development within STG, and was laid off alongside 3,300 other US employees this past June. After first quarter results became public, employee morale within STG pretty much sank. Contractors were cut first, then a number of benefits were either reduced or postponed till the end of the year. It became pretty obvious that some drastic cuts were about to happen (now known internally as Project Mercury), but I made the decision not to jump ship, hoping that my performance as a solid contributor would see me through.

On June 12 I was laid off anyway, and while I was saddened to leave, part of me was relieved to be moving on. Based off my first-hand knowledge, I can attest that IBM is a huge company, and as such it's very easy to get lost in the day-to-day grind and have your skills as a Software Engineer stagnate. The company did not value employee creativity like I thought it would, and internally teams are constantly absorbed in office/management politics, to the point it ends up taking a negative toll on developer productivity. There were many occasions where I wanted to move fast and resolve customer issues or system bugs, but was slowed by the enormous overhead/red tape involved in making even a simple change.

So if I could give one piece of advice to CEO Ginni Rometty it would be this: Transform IBM into an organization that can move fast to benefit the customer. I believe many of the struggles IBM is currently facing stem from an organization structure that is slow and inefficient, part of which is due to low employee morale (it's a little hard to focus on your work when you're constantly fearing cuts/layoffs).

Fortunately for me I got back up on my feet pretty quickly, and landed a better paying job that values employee creativity. I still keep up with IBM news through the IBM Alliance, and feel for a number of IBM friends and former STG colleagues who are most likely affected by this furlough.

johnward4• 13 years ago

I hope you had sometime in to get a decent severance. We were acquired by big blue just a little over a year ago. I knew it would eventually come, but finally some of our office got cut. One of my friend got 2 weeks pay as a severance. I really don't see IBM ever being the type of company that can move fast. The biggest change for us is that we literally can't help customers anymore. We have to jump through hoops just to work with our own support team. I just can't wrap my head around the level of red tape and BS policies in this org.

johnward4• 13 years ago

I don't play the market, but one thing I don't understand is constant need for "growth". I mean once you have one of the largest companies in the world how much more can you really grow? What is so bad about being good at what you do and making a decent profit. Why is there always so much emphasis on growth strategies? I guess it's all because of wall street.

IBM To Furlough Most Of Its U.S. Hardware Staff In Late August

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