Robert Cringley writes that he has friends at IBM (NYSE:IBM), and they are telling that IBM is going to drastically reduce the Global Services headcount in the U.S., cutting more than 100,000 this year.
Currently, IBM has about 350,000 employees across 170 countries. Cringley referred to this gradual downsizing as project LEAN:
LEAN began last week with a 10-city planning meeting for Global Services, which wasn't, by the way, to decide who gets the boot: those decisions were apparently made weeks ago, though senior managers have been under orders to keep the news from their affected employees. If you work at IBM Global Services, ask your boss outright if you are on the list to be fired.
Basically, IBM is looking toward lower cost models that involve outsourcing and offshore operations, such as in India and China. IBM has 53,000 employees located in India and is investing in building a workforce in China. IBM CEO Sam Palmisano said that his company would invest $6 billion in India over the next few years.
Cringley connects the layoffs with cranking up IBM's share price.
All this is supposed to happen by the end of 2007, by the way, at which point IBM will also freeze its U.S. pension plan.The point of this has nothing to do with the work itself and everything to do with the price of IBM shares. Remove at least 100,000 heads, eliminate the long-term drag of a defined-benefit pension plan, and the price of IBM shares will soar.
Moving work offshore is not a panacea. Even with the Internet and great video conferencing, not having key people on site and the capability to truly partner with customers will result in shoddy service and unsuccessful deployments. What is IBM going to do? Fly over tens of thousands of engineers and project managers from India or China to replace U.S. workers and put them up at Holiday Inns across America and Europe?
I also have friends at IBM. One IBMer told me that employees from IBM India who work on U.S. projects sometimes have language problems and may be lacking in the technical skills needed to deal with particular business scenarios. "Projects get bogged down because IBM sends over trainees, who then keep asking senior people how to do things, and those senior people don't have time to take those people to school," one of my IBM friends, who didn't want to be named, told me.
An Amgen (NASDAQ:AMGN) project was outsourced to IBM India and nobody knows what's going on. It's ok if you treat the project like manufacturing, where you have specific instructions like 'saw a board to this length,' but most IT projects are not so straightforward. If I am Picasso I can't teach you how to paint. Some IT projects require more experience and local understanding related to the business, culture and communication.