IBM Cuts Systems And Software Jobs, Hopes To Boost Profits

June 24, 2013 Dan Burger

Like night follows day, darkness is descending on nearly 3,000 IBM employees who are being dishonorably discharged–the company prefers the term “workforce rebalanced”–from the payroll of the IT giant in the United States and Canada. On a global basis, the number is expected to exceed 5,000 and possibly as many as 8,000 could be without jobs by the end of the year. Earnings per share, which guides IBM’s decision making, should benefit, while families and communities get the dirty end of the stick.

Don’t let that first paragraph fool you. I despise the influence of stock prices over corporate citizenship in these decisions more than I let on. IBM, of course, recognizes this kind of news is not very flattering. But it is also aware that it is just the kind of behavior Wall Street admires.

Very little would be reported on the topic of workforce rebalancing if IBM had its way. It is mostly through the efforts of the Alliance@IBM that it comes to light. The Alliance is a workers’ group not recognized as having bargaining power with IBM, but its members feed information through it that then gets wider dissemination through the media. IBM tips its hand just slightly in its financial reporting to alert investors that is making changes that will have a positive effect on earnings. It doesn’t want to publicly appear happy that people are losing jobs, but it is well-received news at the highest executive levels.

The job loss number provided by Alliance@IBM is validated through documents IBM delivers to the severed workers, who then share that information with the union. The documents provide details according to work groups and indicate which job titles are being eliminated, how many individuals with that title are being eliminated, and the age of the employees who have been eliminated.

Most of validated job cuts come from countries where there are IBM union contracts and this type of accounting takes place. There are certainly job cuts going on around the world, where unions are not in place and workers are not provided documents with the information noted above.

The totals reported by the Alliance@IBM are fluid and have risen since early media reports had the number placed at between 1,500 and 1,600 in North America. Other sources have early reports of 400 estimated job losses in Italy, 850 in Germany, and 430 in France. These numbers are expected to rise. In Australia, there are reports that vary from 1,000 to 1,500 people being fired.

As of June 21, the Alliance@IBM website counted 2,930 IBM jobs have disappeared in the United States and Canada during this last round of job eliminations and relocations. In this latest round of IBM workforce adjustments, statistics show the work group areas hardest hit by the job losses were: Software Group marketing with 222, Systems and Technology Group semiconductor research and development with 165, Software Group Information Management (databases and tools) with 137, Software Group industry solutions with 126, Global Services’ application management services with 123, STG storage systems development with 121, Software Group collaboration with 115, STG advanced microeleoctronics solutions with 114, and STG electronic design automation with 106. The remainder of the 43 work groups included in the job loss statistic reported by Alliance@IBM had between one and 100 employees eliminated. The complete report is posted on the Alliance@IBM homepage.

As we previously reported, IBM allocated $1 billion worldwide for restructuring, including severance expenses. Based on that allocation, it is estimated that IBM intends to reduce its workforce between 6,000 and 8,000 people. The company spent $803 million on workforce restructuring in 2012 and $440 million in 2011, according to a Bloomberg report.

Lee Conrad, the national director of Alliance@IBM, told IT Jungle that IBM previously reported job cuts by location, but stopped providing that information a few years ago. He argues the cuts should be transparent because IBM–and other companies–receive tax breaks and tax incentives from many different states based, in part, on employment numbers.

“Beyond the issue of tax breaks and tax incentives, this is about being a good corporate citizen,” Conrad says. “Tell people the truth. Why keep it all a secret? It makes the company look bad. It makes them look aloof and uncaring.”

The Worker Adjustment and Retraining Notification Act (WARN) was put into place in the United States to protect workers, their families, and communities by requiring employers with 100 or more employees to provide notification 60 calendar days in advance of plant closings and mass layoffs. There is no indication IBM has disregarded this. Conrad, however, claims IBM manipulates the timing of the employee notifications to sidestep the intent of WARN.

“IBM likes to play games with the WARN notifications by keeping just under the threshold for reporting at the big IBM sites,” he says. “They give employees 30 to 90 days before they technically have to be out of the building, which allows them to report a number at the end of a 30-day period that is part of the larger group of job cuts and stay under the threshold. It’s a matrix with people in various locations reporting to a department that consolidates those employees at possibly a location where there are no job losses.”

“States and governors should demand companies be transparent because these types of cuts affect the economy. And you’d think the federal government would like to know when a couple thousand employees have been cut.”

Alliance@IBM has also actively fought legislation on H-1B visas by encouraging IBM employees to contact their congressional representatives to oppose it.

“When we see IBM continue to fire U.S. workers year after year and then keep H-1B workers, or even L-1B workers, we find that unconscionable,” Conrad says. “I think that when companies say the foreign workers brought to the U.S. have skills and qualifications that cannot be found in the U.S. labor market, it’s a lie. When you look at the job titles of people who have been cut, they are skilled and knowledgeable. Many have been with IBM for many years. They are seeing a change inside IBM and are wondering how is that impacting the business? What is the future of IBM when earnings per share are manipulated by cutting long-time employees? That’s a story in itself.”

IBM’s standard policy is that it does not comment on topics related to staffing.

The U.S. worker population at IBM is steadily dropping. Before the job cuts, Alliance@IBM estimated it at 91,000. The latest cut brings it to fewer than 90,000. It was 160,000 just 10 years ago.