Readers love predictions so for 15 years or so I’ve been making lots of them during the first full week of each new year. The first time I did a predictions column it was because I couldn’t think of anything else to write about that day and the reaction from readers was so strong that I’ve been stuck doing them ever since. What started as one column per year filled with about 10 predictions has expanded over time to as many as 10 separate predictions columns because as I age I am becoming ever more long-winded. Sorry. It’s reached the point this year where this introductory column won’t even contain predictions, just a guide to the several columns that will follow in the next few days. They will begin, of course, with a look back at my predictions from a year ago to see how smart or stupid I was. Historically I’ve been about 70 percent smart and 30 percent stupid in my predictions with that number more or less dependent on how vague I can be. Sorry again.
You may have noticed I’ve been away. I was helping to launch Mineserver, my kids’ startup. That painful birth should be complete by the end of this week. Next week — after I’ve recovered from the predictions debacle — I’ll write a special column all about what it’s like for a guy who last shipped a technology product in 1986 to do a tech startup with co-founders whose median age is 11. To call it a challenge would be an understatement, but I think we will one day look back fondly on the experience.
My first predictions column will appear later tonight (Monday) and they will all be done by the end of Friday. There’s a vague possibility I’ll also do a column Friday about IBM, which is supposed to start its first 2016 layoffs this Thursday. That column will only appear if I feel there’s something unsaid or not obvious about the situation that needs to be pointed out at that time.
It’s not at all clear that IBM will announce anything on Thursday but I have it on good authority that about 10 percent of Big Blue’s worldwide headcount (about 30,000 people in all) will be let go early in 2016, whether they issue a press release to that effect or not.
Lord knows how they’ll decide who to let go. To do such a large layoff so early in the year means it probably can’t be based on year-end numbers. Maybe they use a ouija board.
I’m told that in the USA, IBM workers were asked to get their performance information (used for promotions and raises) in early for 2015 — 2 months earlier than normal. That was a big tipoff that something was going to hit the fan in January. To the best of my knowledge IBM hasn’t given any USA workers their ratings for 2015 yet. so this job action is being decided independent of the facts.
The fourth quarter of calendar 2015 was a debacle for IBM and it’s clear from the outside looking-in that the company won’t be shying away from that description. Managers are being told to put employees who haven’t performed on performance improvement plans (PIPs) immediately. A manager on the conference call asked for the definition of “haven’t performed” and it’s strictly based on how much they sold (even for technical sellers, who have a support role!). So you have technical and sales people working their asses off trying to sell stuff that nobody wants to buy, and being rated a PBC 4 and put on a PIP just because the company hasn’t invested in improving their products.
The ship is going down. There are usually panicked calls trying to get something to happen by end of the quarter, but this time there hasn’t been much of that. The sales pipeline is pretty empty of big deals that might have had a chance to change quarterly results. And registration for the big annual Interconnect (former Impact) conference is extremely low (about 15 percent) and it’s next month. They are resorting to giving away passes to save face.
Sometimes public companies like to pack all the bad news together to either just get it out of the way at once or to justify some draconian measure. In this case with IBM I suspect both motivations are there. If the news is big and bad enough Ginni Rometty can use it to justify some significant restructuring beyond just whittling the headcount. I suspect she wants to sell or close entirely Global Services, taking a big earnings hit in the process while leaving many customers turning slowly in the wind. Certainly something has to give: with interest rates rising IBM may not be able to afford much longer borrowing money to buy back stock and shrink the company.
Everyone I know who is still working at IBM is hoping for a separation package, their fear being that the era of packages may be ending or has already ended at IBM. Morale is at rock bottom.
There is a very clear and predictable pattern here. The quarter ends. IBM calculates its numbers. It then recalculates its forward-looking numbers. It sizes and implements staff reductions accordingly. It announces quarterly earnings, updates its forward looking numbers, then announces cost reduction plans and write offs.
Since the whole idea is to save money and the most expensive IBM workers are in the USA, they will be hit extra hard.
If 30000 is about 10%, that puts the total number between 250k and 350k, so you are claiming the 25% overall reduction you predicted last year happened?
Depending how you measure it (which start and end dates you choose), yes. IBM cut 50,000 heads in India alone.
Do you have anything to back that statement?
I am just curious on how you know it’s a fact.
It came directly from IBM, comparing Indian employment numbers listed in the 2013 and 2014 annual reports. They dropped from 135,000 to 85,000 in a year. The timing is a little different because Project Chrome launched in India at its original scheduled date, not the six month delay in U.S. layoffs demanded by the IBM legal department. A lot of this is covered here: http://spectrum.ieee.org/view-from-the-valley/at-work/tech-careers/which-ibm-layoff-numbers-add-up
You did read that article right? It doesn’t back you up. You surgically said 26% by the end of February, a month from the date of publish. IBM simply did not have that massive a layoff in that short period. It didn’t happen.
Yes they laid off a lot, but not in the not in the way that you predicted. You were wrong. Own it.
Actually, in retrospect Bob was very close. When you add up the layoff’s of IBM workers, contractors, forced retirements, and divestitures the numbers add up to a large amount. The layoff’s spanned almost a year and had started several months before it was covered in the press. Each batch of layoffs were kept small to avoid attention. There were enough of them to add up to some serious numbers.
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If you want back up — look at IBM’s financial statements. Sales are dropping at a double digit rate. Net income (earnings) is relatively flat. Huge amounts of money is being spent on stock buy-backs. Add up the money. Its being covered by staff reductions. Figure about $25,000 per year for an India worker and $100,000 for a western worker.
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Between 2013 and 2014 IBM’s revenue DROPPED approximately $3.625B, Their earnings dropped $640M. They cut almost $3B from the books. That is $3B in staff reductions in all forms. Do the math, that’s a lot of workers. Don’t get caught up in the semantics of staff cuts. A layoff is usually interpreted a forced termination of a permanent worker. In the big IBM picture the staff reductions is much more than that. They are releasing a lot of people to keep their numbers up. If you want “back up” evidence, do the math!
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No the real scary part of this — IBM HAS to layoff lots of people. Their business is in trouble. Again, do the math. How many years will it take for the new (CAMSS) stuff to get traction? How much business will actually result from the new stuff? In 5 years IBM could be 1/2 the size it is today. IBM will continue to buy back more and more stock in an attempt to maintain shareholder value. Buy more stock, reduce more staff. Less staff, worse execution and reduced sales. IBM’s financial engineering has put it into a destructive feedback loop. Want “back up”? Do the math.
Any predictions on how much of a raise and bonus Ginni Rometty will reward herself this year?
Augusta National Golf Club annual membership dues aren’t cheap, you know. She’ll run IBM into the ground, but she’ll be praised for being a woman CEO.
Ginny must be angeling for a spot on the ticket as Trump’s VP.
Fortunately, it’s not up to her. Trump has a reputation of success working within the free market, and of firing people not up to his standards. I wonder how she could defend her record to him.
I loves me some predictions! Can’t wait to see what’s in store (or not).
As for IBM, sayonara.
I work in IBMs R&D in Europe. We had the usual number of “win reports” in Q4 but other than that the last 3-4 weeks were unusually quiet. We were told the PBC process is now changed as to Managers no longer being required to give someone a 3 rating if they want to give out a 1 rating. We were told there could even be 1s without 3s on a team… probably also works in reverse but I don’t know. As for sellers as far as I know with my 19 years of IBM experience they were always given very bad ratings if they missed their quota. Tech Sellers (I was one) more or less were given a “team rating” based on the sales numbers of the sales teams they supported. Another observation I made is that quite a few people close to retirement age were given packages for early retirement last year, most of that happened in Q4 and almost everybody took the deal. Morale is bad even among the Management and Executive teams, maybe that is no surprise. Also morale gets worse with IBM years, the longer someone worked for IBM the more they are pissed off. Morale is ok among the people IBM hired from college within the last 5 years. There are still some projects within IBM which are very interesting to work for and are even being managed well, unfortunately they are the 20% and not the 80%. For those 20% there is even focus and investment beyond 12 months. Personally I would be ready for a smaller and more focused IBM, everything is better than changing strategy every 6-12 months. PS: PIPs do not exist in the EU countries I worked in (I also worked in the US). As a European I always find it interesting that people complain about what is legal in their countries, especially the US, but then don’t vote for changing their own labor laws.
Re: “don’t vote for changing their own labor laws.” Perhaps that’s because we don’t agree on how to change them. We recognize that any move in the direction of unionization or socialism will only make us even less competitive in the world market.
PPS: apparently Steve Mills got a retirement package as well and took it…. I think that is good news for IBM. Ginni needs to get rid of the old guard and replace them with outsiders like Derek Schoettle.
If an outsider like Derek is the answer then why is the CDS division going to be dismantled. He was the CEO of Cloudant and then quickly became the GM of CDS which has failed miserably. It seems like one of two things is happening; IBM is applying outdated tactics and policies to companies/products they have acquired that they really do not understand or they are relying on bullshit artists to “change” IBM from within. Either way whatever they are doing is not working now and may not work for a while. The question is will IBM survive in the new age where companies need to innovate from within?
Cringely said they’d fire 25% of the work force between Feb 1 and Feb 28 last year and it didn’t happen. Yes people got laid off but not in nearly the numbers over a short period of time as was indicated. The IEEE article called out specific divisions and included numbers that had already been laid off by the time Cringely’s prediction came out.
Yes, IBM will lay off a lot of people, as they’ve been doing almost every year since the 90s. That’s not really surprising and it sure as hell isn’t news. And yeah, they are a very misguided company and are likely to continue to be for the foreseeable future. But please take any numeric prediction with a grain of salt. They’ve generally been way overblown.
Also, the IBM unionization effort is dead. Odd that this isn’t mentioned anywhere since so many of his previous quotes came from the now shuttered Endicott Alliance job cuts site.
Why no comments about the Apple/IBM initiative to purchase and integrate more Macs/iPads into IBM? Are you so negative on IBM you won’t discuss this win/win? IBM and JAMF have both worked this out and it really bodes well for companies like mine to quickly intergrate Macs into our workforce with very little IT help. It’s a huge win for Apple and if IBM can leverage this for other enterprise companies it could open a huge amount of business for them. You have to take the good with the bad.
“So you have technical and sales people working their asses off trying to sell stuff that nobody wants to buy, and being rated a PBC 4 and put on a PIP just because the company hasn’t invested in improving their products.”
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OR… The sale is made, then lost because IBM cannot get it done. Post-sale execution in IBM is in very poor shape.
First some facts….PIPs are common in the UK. Almost everybody gets one since almost no one knows what their targets are until judgment day. With so little work it’s mostly down to utilization and sales. It effects higher bands more as work is sold at a higher band rates and then given to lower bands (offshore or grads) to cook up higher margins. An email went around explicitly telling PMs not to give work to more expensive staff. “Bait and switch”.
Needless to say the quaility is dreadful and this has a knock on effect with future client work.
The Apple/IBM getting Macs etc is all nice and warm and fuzzy like the office decor going into some locations. This is just marketing smoke and mirrors. It’s the equivalent of having a front room to impress guests but the rest of the house is a dump.
Go to Google, Apple and most client sites and this already normal! Yet IBM shouts about it, “check out our new fancy offices”, that hold 30 workers and it’s just colourful furniture with a few screens, nothing fancy!
Other consultancies have had screens in offices for 10 years but well done IBM for finally thinking people might want to share stuff and see something besides PowerPoint.
Clients are not fooled and are staying clear. Internally the mood is grim, bullying is rife and people are demeaned and it’s gang warfare. In the last months it’s gotten worse. The mood of people returning is “I had better update my CV”.
The layoffs are coming. There is only so much they can do to cook the books and spin or try to spin. So Apple sold IBM lap tops. How is this a win/win? It’s not like anything remotely interesting is done on them. Just a shiney device to show more PowerPoint while to navigating their dreadful Connection W3 site and torturous Lotus Notes.
John, post sale execution ability is also a main reason for not closing. You get to the pre-contract part and find there are no delivery resources, no experience, no testimonials and the commercial terms are not that great since IBM does not make any accountability claims and still wants control of IP. Then IBM wants to push as many staff as possible into the client site and add in site expenses for which IBM makes a profit of by ‘kickbacks if number of rooms are booked’.
The company has to change. It can’t compete on cost, so it has to compete on quality. Customers are willing to pay a premium in cloud and analytics, but not for services. That low (tiny) margin business has tanked more high margin software deals because of customer sat issues than anyone can count…and they rarely buy and deploy IBM software products!
The mainframe should go too. Yes it’s profitable now, but customers know they’ve been gouged for years, and most are trying to migrate off because they can’t find cobol programmers anymore. And once you retire the applications, there’s no need for that hardware. But IBM won’t let their non mainframe divisions take out mainframes, so they go to competitors instead and they lose all the revenue, not just some. Apple eats their own product lines to keep fresh. IBM needs to do the same.
First Chuck, there was a report that switching to Apple Macbooks and iPads is saving IBM a TON of money. The Store (consumer) delivery model is saving tons of money, and the company has done a much better job of providing the setup instruction, and better setup scripts, than with the prior generation Thinkpads and ISSI. It’s also more of a case that the the user has to be smart about their setup, and it just doesn’t “come working” from IT. Old timers can lament “all day long” about the halcyon days of IBM, but they are long gone. We live in a lean mean competitive world and the remaining business of IBM have to be “leaner and meaner” than the competition. And smarter. And as for the “old guard”, the sooner they are gone, the better. Our business was an acquisition, and one comment was made last year that IBM needs to become more like that acquisition in management, and less like “IBM”.
My specific group made it’s numbers, with “no expectation of headcount reduction”. The big worry for us is taking on more of these “brand-move products” with no new headcount, further diluting our focus from our primary brand(s). IBMers need MORE focus to be successful in their brand, not less, so maybe being more aggressive with cuts would actually improve the company’s focus on what remains.
Bottom line, divisions that aren’t making money are being taken apart. Products that can be salvaged are being moved to more profitable brands. Yes, it will take some time. Yes, margins are being challenged.
For most of us who remain, we expect that IBM will be a much smaller/leaner/more nimble organization and will have to put up the productivity (measured in revenue per employee) that Apple or Google does. If we do not do that, we will not survive, even at 1/2 or 1/4 the size. Same is true with HP. It’s a new world out there and IBM and HP have to adapt and innovate, or die.
Here’s a more balanced view of IBM for 2016 – https://www.fool.com/investing/general/2016/01/02/will-2016-be-international-business-machines-corpo.aspx
There’s a brand new doc from Jan 2016 on the IBM internal pages that states separation payments are capped at 4 weeks of pay. If that means what I think it means, that’s a huge reduction from the prior 26 week cap. Not only is IBM about to show thousands the door, it’s going to poke them in the eye on the way out.
You’ve been milking this projections thing for 3 weeks now. What about all the prognostications that you made last year?
Bob reviews the previous year’s predictions in the first post of the current series of predictions.
I dont buy any of these statements in this article..
IBM was a great company , but its model is not relevant in today’s world , no clear strategy . They killed efficient products because sales folks commission was small and they were not able to milk customers .
Microsoft knows how to sell ..they are selling at 85 % discount , its better to sell something at small profit then nothing and sit on pile of code. Microsoft is flying and IBM is going into dust just better strategy ..kudos to Nadella .
Good luck to all IBMers ..I have lived this horrific life for 15 years every year first quarter is reserved for layoffs .
They have started in the UK today.
Performance appraislas were completed on the same schedule as last year
IBM could hardly have responded worse to the winds of change in the IT industry since the financial crisis. Value realization is everything to customers now, brand and even relationships are far less important. IBM have typically not recognized this, and still offer service contracts that do not share risk in a meaningful way.
Customers just move to where value seems better indicated.
Its very sad IMO.
The pressure from first line managers to simply drive people to quit is palpable. I know of no one who isn’t being harried and verbally and publicly harassed on a near daily basis by their own management. Second and third line managers aren’t being replaced when they leave, the organization under them being rearranged for the flavor of the week. In the cloud space there’s little organizational coherence at all with each new acquisition bringing yet another Director or VP on board and each of them claim they are the leader of the whole business. Theyre not being integrated. But the IBM model for acquisitions is to get rid of the firm’s senior staff in 2 years so when all these people cash out the cloud business will implode. As someone with about 2 months to 20 years I am going to do whatever it takes to hang on. After that, it will be a mad dash for the doors. Everyone I know with longer service feels the same. This time next year the average tenure of an IBM staffer will be maybe two years.
I worked in IBM finance for 19 years. I left in 2015. I could not be happier. As the years went by, I felt completely exploited by a management team with no ethics. They went out of their way to abuse me and others around me. Also the financial tactics leave a lot to be desired. Each year they got more and more aggressive in pushing GAAP to its limits. Sadly, I don’t see a turn around….how can the CEO get a bonus with the company doing so poorly?
Hello Bob and fellow readers of I Cringely. I don’t know what we would do without folks like you and Peter Greulich and Lee Conrad. Thank you. Whatever the magnitude ultimately in terms of numbers this particular layoff turns out to be,,,, it is horrible, brutal and awful.. to those affected and the colleagues left behind on a worldwide basis, IBMers and our brother and sister Contractors. This as the IBM executive and management team continue to reward themselves for a piss poor performance PPP ( did I really write that? ) Quarter after Quarter after Quarter and on and on and on we go So while much of the company has the dreaded PIP .. I don’t think there is any doubt the management team .. has the PPP… Look at the stock this morning!!!. Every layoff has been horrible, brutal awful as every future one will be. The Alliance@IBM is no more because too few of us stepped up to join, while at the same time treating the information as a valuable tool to us. I was and am a proud Alliance@IBM member. Lee Conrad and the wonderful folks at the Alliance have a Facebook page Watching IBM. I was very sad and disappointed that so few of us stepped up to join the Alliance despite the heroic and valiant efforts of the Alliance team. So Bob , Pete , Lee and the Team . Thank you Respectfully, Deb Kelly Watching IBM
Yep IBM in UK are doing compulsory redundancy with statutory payout 🙁 about 14% of selection pool will go
Why is there not more media exposure on this?
The Media have ridiculed other companies for redundancies how do IBM get away with it?
UK, USA, Australia and New Zealand just to name a few
I have heard this year IBM is paying nothing for loyalty shown to the company
I have heard people that have worked for 30 years or 15 years get the same payout which is unfair
Especially with the bonus payments to management seems unfair to its people
You are so cool! I don’t suppose I have read a single
thing like that before. So wonderful to discover another person with a few genuine thoughts on this topic.
Seriously.. thank you for starting this up. This web site is one thing that is required on the internet, someone with a bit of originality!