Thread regarding IBM layoffs

4frm. I believe the break up of services is based on strategic initiatives (cloud, AI/cognitive, as a service) vs everything else. The everything thing else are the old services contracts that have run their course and are due to be renewed. The IBM CFO said as much on the last earnings call. IBM India has been able to continue those contracts with new terms, due to their lower labor rates and the enhancement of the internet allowing offshoring. The problem with the new contracts is the profit margins are much less than IBM is used to demanding. As such, IBM has been running a race to the bottom of Sacrificing profit for slower growth revenue. Sooner or later something has to give!!! That’s the split of slower growing services (everything else) vs the faster growing services (strategic initiatives). Will the board allow this continuing???? Who knows they have been very patient with Ginni. I believe the owning institutions are demanding faster growth even if they have to split the company. THUS the Bain relationship. We are almost 2 years into the restructuring of IBM so the 60/20/20 rearrangement of the work force should just about be done so it’s now time for the sell off/ spinoff/ divorce of slower vs faster growth services. NOTE legacy HW continues on both models, so one division or the other will have to absorb the HW and sell to the other. I believe new IBM (faster growth) will continue on with System Z. System Z is as old as dirt, but it drives faster growth as the fortune 250 will never get off of Z, THUS more transformational services. What IBM does with Power Systems is a different story, as AIX and OS/400 are fading away quickly at the expense of LINUX. Will IBM keep Power as it drives AI/Cognative, or will IBM just farm the IP invested into Power, and let someone else build it???? Who knows, but IBM is definitely breaking up into faster growth and slower growth. Bain I believe will take the slower growth side of the house, and once acquired, cut deeply into the management team to harvest out cash flow and profitas there is no strategic management needed, BUT rather just operational/efficient management needed.

-4frm that is one possibility. Another possibility is he needs to change something to make himself look relevant. I am a long time IBMer and divisions are constantly forming and disappearing. Each one is self sufficient, then they split into a "shared services" model, then back. Over and over they rearrange these deck chairs. When the same old moves are used up, the execs switch jobs around and start again. it never ends and it never works.

Yes, the break up is happening sooner than later. I listened to the Arvind Krishna (cloud SVP) this morning to hear him say that he is building his division to be ‘self-sufficient’. He his bringing in a bit of finance, HR, marketing, etc... so that his division can operate on its own... that can only mean that other divisions (GTS, GBS) are going to be sold off in the near future.

This sure looks a lot like the Intel server sell off to Lenovo. Cut employees to the bone over 4 rounds of cuts. (approx 30 months) Finally accept an offer where the value of the asset has dropped more than 50% vs the original asking price. Stuff the acquiring company with excess employees (mostly managers) saying they are essential to running the company. Let the acquiring company find out the excess employees add zero value, thus they have to do the dirty work of laying off. Claim success

GTS selling to anyone is better than GTS staying with IBM.

Well IBM services is run so top heavy that any company who takes them over and operates within a normal IT support structure will turn some profits.

DXS or CSC will not have 10 managers bossing a team of 4 people around like the IBM does.

I seen this happen several years ago with two big players and this will not bode well for managers.

Hope you enjoyed your time at IBM.

Di1. I expect this to happen sooner rather than later. Remember Bain is advising IBM, and they tend to try and split entities into 2 strong and lean organizations. I believe “services” (think IBM India) will be sold off or spun off to Bain or DXC, OR to one of the Indian competitors (Tata, HCL, Wipro, etc etc). The remaining IBM will be approx 50-55 billion in revenue, and be approx 200K head count. They will have the faster growing portion of the business, PLUS have a big check for the sale of the slower part of the business. Hopefully they spend the check wisely