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IBM to cut thousands of jobs as coronavirus plays out
- deleted 6y ago[deleted]
- gumby 6y agoCutting headcount rather than dividend isn’t a good look. But this makes sense now that IBM has become a body shop. I doubt the cuts will come in what remains of research, manufacturing, or design. Likely all in “services” and its sales teams.
- iamback 6y agoWhat is a body shop?
- XorNot 6y agoContractor. You bill time and materials to the customer, rather then charging for the product. It means you're not going to grow because you're not hunting for value multipliers anymore (insert joke about the difference in cost between what IBM bill you for those people and what IBM pays them).
- KineticLensman 6y agoA consultancy company I used to work for referred to this as 'brains by the pound'. The implication was that the only way to increase revenue (assuming constant rates and expenses) was to add more staff (perhaps working for new customers). There is one way to make it scale, sort of. Find a consultancy solution that is applicable across multiple customers. E.g where multiple customer teams have essentially the same problem. Once you have ironed the bugs out of your consultancy solution, you can template it and reuse in new situations with fewer surprises. You can still include a risk bucket in your charge-out rates, but this is more likely not to be used and thus taken as profit. In the case with which I'm familiar, a very large organisation had multiple teams writing business requirements that would be put out to tender. The central organisation had never tried to standardise this process, and multiple similar mistakes were made by multiple customer teams. Hence a good business opportunity for a small external consultancy who could spot the mistake patterns and solve them multiple times. Whether the template approach is good for all customers is a wholly different question. You can also get badly burned (in cost and / or reputation) if you find after starting with a new customer that the template isn't applicable after all. Hence the common situation where a consultancy organisation deploys its 'A-team' to win and start the work, and then swaps them out for cheaper and less skilled staff to complete the deliverables. [Edit - added example]
- geodel 6y ago> Find a consultancy solution that is applicable across multiple customers. E.g where multiple customer teams have essentially the same problem. Once you have ironed the bugs out of your consultancy solution,... That is called product and apart from few top vendors product companies are getting hammered in similar fashion or worse.
- gumby 6y agoThe difference: when GM cuts a person and still ships a car their margin goes up. When IBM cuts a person from a project their revenue falls. Having a template or cookie cutter helps because you can reduce execution risk (which can also help sales) and also assign a more junior person, at the same rate, to the later projects, which does goose profits.
- KineticLensman 6y ago> because you can reduce execution risk (which can also help sales) Yes. This was exactly the case in the example I mentioned in my earlier comment. The specific aspiration was that once we had successfully solved the problem for one customer team, that team would act as our internal reference for the next customer team.
- inapis 6y agoHuh. I always thought body shop would refer to companies who hire at scale. Indians call them MRCs - Mass Recruitment companies. IBM/TCS/Infosys/Wipro/Cognizant are consultancy shops which are some examples of MRCs. They generally hire at scale - like 10,000 people in one go or scooping up a whole college’s batch. Thats how they have also been able to keep a freshers salary static at 3-5 LPA (~4k-6.5k USD) for 13 years now.
- gumby 6y agoLocal jargon. In the states a body shop* is a company where they are sending people to do work and charging a commission on hours worked. They could do some project consulting too (clearly some people cost more than others and some payments are structured around milestones or even efficacy) but essentially at the end of the day revenue is roughly proportionate to headcount. Some firms using this model are, due to pretentious courtesy, not described this way (e.g. law firms, landscaping firms, and other such service industries). By contrast large employers like Walmart or GM aren't considered body shops as their revenue is not proportionate to headcount, and in fact improving productivity helps their model. * it's a joke name as "body shop"s original (and continued) meaning is a company that repairs dents in a car's "body" (the non-engine parts).
- Consultant32452 6y agoYeah, to me this just signals IBM's customers cut all their contractors as part of their own layoffs. IBM doesn't have anything for these people to do in house, so it has to cut them.
- halfastack 6y agoAn interesting POV. I certainly hope that's true. Is IBM reputation good in the contractor space? As in, are their services largely viewed as dependable and good value?
- Sylamore 6y agoPretty much the entire power architecture group was cut
- PhilipA 6y agoRemoving headcount and still maintaining the dividend will make it hard to hire in the future. It sets a clear signal where the priorities are.
- smabie 6y agoIBM absolutely needs the 5% dividend to survive, especially now. Without the dividend, IBM gets kicked out of all the high dividend ETFs and investors dump them on mass. Moreover, I imagine a substantial part of an employees comp is options or RSUs.
- deleted 6y ago[deleted]
- mettamage 6y agoOther than lower bonuses for employees. Why would this be bad for IBM to have a lower stock price? I understood all the terms, but I wouldn’t know the reasoning behind why it is important to be listed in certain places.
- scribu 6y agoIf the stock price is too low, then the company becomes a target for a hostile takeover. As an IBM executive, you don't want some PE firm becoming majority owner and replacing you with someone else.
- mettamage 6y agoI don't know anything about IBM in this regard. Isn't that situation dependant? Or is such a thing common enough to say that this usually is the case? I.e. +50% shares need to be outstanding (assuming nothing is owned by the hostile PE firm).
- scribu 6y agoYou're right, there need to be enough outstanding shares for a hostile takeover to take place. But more relevantly to IBM's case, the top shareholders are also the top executives. [1] So, in this case, the stock price going down affects them direcly. [1] https://www.investopedia.com/articles/insights/052216/top-5-ibm-shareholders-ibm.asp https://www.investopedia.com/articles/insights/052216/top-5-...
- dijit 6y agoHopefully RedHat remains mostly unscathed. :(
- lima 6y agoI wonder how their promise to have them operate independently is going.
- dralley 6y agoRed Hat employee: There's been no layoffs and I don't expect any. RH managed to avoid layoffs in 2008 as well. A hiring freeze is in place for most departments but there are still some positions which are actively hiring. I can't say I'm surprised that IBM is having layoffs, though.
- 0az 6y agoI will note that internships are still going on. Everybody also gets their housing stipend in cash.
- torgian 6y agoClearly coronavirus is a great excuse to let workers go. I doubt there’s going to be much hiring going on once this plays out, at least not with current wagee
- Befterriager 6y agoFor as long as I can remember, IBM has always been cutting thousands of jobs every other month.
- freehunter 6y agoYeah you can copy and paste this story and these comments at least once a quarter. Same story “IBM lays off thousands” same comment “IBM isn’t even a company and this will surely be the death of them”. Literally ever since I first heard the letters IBM I’ve heard these same headlines and comments. And yet my clients keep buying IBM products and hiring IBM consultants. There is a huge enterprise world outside of Silicon Valley that HN is completely unaware of.
- iamback 6y agoI second that. And every time the sentiment of most commentators is pure vitriolic. I really don't get it. Unless it's coming from laid-off workers - which I can understand and empathize. But I highly doubt it. My understanding is that people here just hate IBM because it's old and out of fashion mostly mirroring the same valley sentiment towards anything and anyone on the older side of the road. The amount of misconceptions that are passing in a lot of these comments for facts is astounding. Many pretend that they don't know that IBM is one of the major PaaS and IaaS cloud providers. Others pretend that they ignore all the R&D done in IBM. Others still ignore the fact that IBM is one of the most open source friendly companies out there. And others still forget that it is probably the oldest IT company around that has reinvented itself more times than Elon has begged for public attention. Anyway. Each with his own opinion. Luckily business out there has it's own as well and places its money on it. With that I'm not trying to absolve C-suite from their responsibilities or their shitty management that will leave thousands of good workers high and dry. This is a different issue altogether but like I said the hate in these comments have nothing to do with it.
- deleted 6y ago[deleted]
- hestefisk 6y agoOutside of big iron mainframe contracts for governments and banks who buys IBM these days? Excluding Red Hat, I would say they are largely managing themselves into obsolescence.
- scribu 6y agoThey do have IBM Watson, which has seen some uptake. [1] Not sure how much success they're having with their other cloud offerings, tho. [1]: https://enlyft.com/tech/products/ibm-watson https://enlyft.com/tech/products/ibm-watson Edit: Added source
- jbsimpson 6y agoWhat uptake is it having? I've only ever seen it used as a marketing device.
- tyingq 6y agoFrom their Q4/2019 results: Revenue Highlights 4Q19 Total Revenue $21.8B Cloud & Cognitive Software $7.2B Global Business Services $4.2B Global Technology Services $6.9B Systems $3.0B So Watson is a portion of the "Cloud and Cognitive". Further down, it shows just the Cloud part: Cloud Revenue $6.8B $7.2B-$6.8B=$0.4B Not bad, but $400M in Watson "Cognitive" revenue isn't a notable portion of $21.8B.
- blantonl 6y agoIBM Watson has been an abject failure. I think IBM dumped a billion dollars into what were essentially 90% shell scripts sed'ing and awk'ing datasets.
- DodgyEggplant 6y agoThey spent billions on buy backs. At some point [1] ~80% of their market value. Really a shame [1] https://www.fool.com/investing/general/2016/04/25/after-forking-out-110-billion-on-stock-buybacks-ib.aspx https://www.fool.com/investing/general/2016/04/25/after-fork...
- throwaway287391 6y agoI don't know how this whole buyback thing works really, but could they not just do a "sellback" of some of the shares they still own if they now need the cash? (Of course they might have to do so at a bit of a loss.)
- willcipriano 6y agoAs I understand a proportion of buybacks generally (maybe not at IBM) were financed by debt. If this was the case they would have to sell enough to cover the debt and interest first.
- findthewords 6y agoIn theory, yes, they could protect their workers' job security with a stock offering. They are incentivised to protect the interests of their shareholders. Unions are set up to (N/A in USA) protect the workers.
- throwaway287391 6y agoAgreed, but then it seems to me that the buybacks are kind of besides the point, and the real underlying issue is that they don't care about their workers (and/or aren't incentivized to), no? In terms of future flexibility / robustness to unforeseen emergencies, sitting on a big pile of your own stock doesn't seem that different to me from sitting on a big pile of cash, except in terms of the risk profile. (In contrast to paying a dividend, where they really can't recoup the cash if they need it.) I could easily be missing something though...
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- markvdb 6y agoCould you please upgrade the link to point to a respectable news outlet? Two obvious candidates: - https://www.bloomberg.com/news/articles/2020-05-21/ibm-is-latest-tech-giant-to-cut-jobs-in-midst-of-pandemic https://www.bloomberg.com/news/articles/2020-05-21/ibm-is-la... - https://www.wsj.com/articles/ibm-announces-first-job-cuts-under-new-chief-executive-11590113061 https://www.wsj.com/articles/ibm-announces-first-job-cuts-un... (paywalled, http://archive.is/imO4i http://archive.is/imO4i might help)
- raesene9 6y agoUnlike a lot of companies IBM'ers use https://www.thelayoff.com/international-business-machines https://www.thelayoff.com/international-business-machines quite a bit and there's a lot of activity in there over the last day or so related to this set of "resource actions".
- analognoise 6y ago"IBM finds another excuse to layoff senior staff members": https://features.propublica.org/ibm/ibm-age-discrimination-american-workers/ https://features.propublica.org/ibm/ibm-age-discrimination-a...
- JackPoach 6y agoIBM has been dead for years. This is the inevitable end.
- stevespang 6y agoTitle should be: Patent Troll IBM uses coronavirus as excuse to cut thousands more senior jobs . . .
- jtdev 6y agoWhy isn’t Watson driving profit at IBM? Is Watson still little more than a “man behind the curtains” marketing tool?
- nekoashide 6y agoFrom my understanding it was a great marketing tool that never found it's footing due to complexity and cost. All of the real world applications for it just didn't justify the price IBM would be charging with the lock in.
- blantonl 6y agoBecause IBM Watson is essentially a billion dollar bet on 90% shell scripts sed'ing and awk'ing datasets. It was a sales and marketing ploy to sell global services contracts
- pengaru 6y agoCan you provide some actual evidence to back your inflammatory, dismissive claims? There is zero mention of sed or awk at [0]. And looking at one of the references [1], it's pretty clearly more involved than sh+sed+awk. Is Apache UIMA [2] 90% sh+sed+awk? At a glance, it doesn't appear to be. [0] https://en.wikipedia.org/wiki/Watson_(computer)#Software https://en.wikipedia.org/wiki/Watson_(computer)#Software [1] https://www.aaai.org/Magazine/Watson/watson.php https://www.aaai.org/Magazine/Watson/watson.php [2] https://uima.apache.org/ https://uima.apache.org/
- sbilstein 6y agohttps://spectrum.ieee.org/biomedical/diagnostics/how-ibm-watson-overpromised-and-underdelivered-on-ai-health-care https://spectrum.ieee.org/biomedical/diagnostics/how-ibm-wat... Watson rollouts have been huge and expensive failures.
- 2OEH8eoCRo0 6y agoAs somebody who has been stuck using IBM Clearcase or DOORS the end of IBM can't come soon enough.
- shadowpawn 6y agoLast time I worked with IBM folks I was shocked at how high on the expense hog those folks lived. Sure they got a $$$ contract from their client but the amount of money they were giving to the IBM folks in expense claims was criminal.
- hiram112 6y agoIBM is notorious for both offshoring jobs to places like India and also heavily abusing the H1B visa, both themselves and through body-shops like Wipro and Infosys. They have more employees in India than in the US. IBM once told its laid off US employees that if they wanted to keep their jobs, they should move to India and take the prevailing wage there: "It's more of a vehicle for people who want to expand their life experience by working somewhere else..." This is when their CEO made $20M last year. I think any company that is currently laying off US employees should immediately have all their H1B, L1, etc. visas revoked and use banned for the next decade. This would be trivial to implement, especially in states like California where the company is required to notify the state before layoffs. I also have absolutely no faith that Redhat won't turn into a shell of itself eventually - all the US and EU R&D moved to India, replaced by sales and lawyers using Oracle's business model. * https://www.nytimes.com/2017/09/28/technology/ibm-india.html https://www.nytimes.com/2017/09/28/technology/ibm-india.html * https://www.businessinsider.com/2009/2/ibm-to-north-american-employees-to-keep-your-job-move-to-india-ibm?op=1 https://www.businessinsider.com/2009/2/ibm-to-north-american...
- beezle 6y agoThe previous CEO did a horrible job. The workforce morale, not good for quite some time, fell further. Rather than try to leverage the deep and unqiue assets/IP of IBM, she sold off many, then made a poor attempt to chase the same type of "cloud" stuff as Amazon, Microsoft and Google.
- dang 6y agoA later thread: https://news.ycombinator.com/item?id=23273960 https://news.ycombinator.com/item?id=23273960