So after five parts and hundreds of reader comments, what will IBM look like by the end of 2015? It will look like Oracle.
With earnings per share meaning everything and a headcount mandate that can’t be achieved without totally transforming the company, IBM is turning itself into something very different. Gerstner’s service business that saved the company 20 years ago will be jettisoned, probably to a combination of U.S. and international buyers.
Look for the Global Services business to be sold to one or more Indian companies while the current federal business will be sold to one of IBM’s U.S. competitors.
Meanwhile IBM will move its business toward hardware and applications delivered by partners who carry the Service Level Agreement penalty risk.
Before we move on let’s examine that SLA penalty issue because I think there’s an aspect of this that’s misunderstood in the marketplace. A decade ago in one of those Aha! moments that transform corporations IBM figured out that it was better to ask forgiveness from its customers than to ask permission. Specifically, IBM modeled two competing scenarios: 1) follow service agreements to the letter, and: 2) ignore service agreements thus saving money and expect to pay penalties as a result. IBM decided it could make more money — a lot more money — by paying penalties than by actually doing what it was being paid to do.
One individual was rewarded for this stroke of genius, by the way, sanctifying what could be one heck of a class action lawsuit.
Just like Ford deciding it was cheaper for a few customers to die than to improve Pinto fuel tank safety, IBM decided to deliberately cheat its customers. The result is today’s IBM, rotten to the core.
Good riddance.
Meanwhile, IBM has spent lots of money on software product applications and on self-managing hardware. They want to own (not manage) infrastructure which is now hardware and software, not bodies.
Services profit margins are terrible in comparison with combined software and hardware. This two-sided business model has both customers and partners paying. So in Big Data and Enterprise analytics IBM hopes to own analysis and value added reporting.
It doesn’t even require squinting to see this as emulating Oracle. Both companies will have big hardware, big data, big applications, but not big numbers of people that were required by the services model. It’s a transformation of the business that IBM will have no trouble spinning as positive for everyone. Everyone, that is, except the thousands of workers about to be let go.
I wonder how they’ll spin that?
That’s dang sure the way it’s lookin’!
Wow – 3 first comments in on week!
Weeeeeeeee!
Douche.
Grow up and blow away.
Sorry, it doesn’t count if the comment doesn’t even pertain to the article—fail.
Wonder why the business press is not responding? One only needs to look back on the job the business press did prior to the discovery of the Bernie Madoff Ponzi scheme scandal.
The business press and the government had numerous warnings but could not see past the reputation to consider the possibility that Madoff was a fraudster.
The business press cannot see past IBM’s reputation to realize the company has changed, the ethics are gone and the only god is money.
In fact CNBC Mad Money famed Cramer lists it as one of the top 10 best run companies in US
Cramer is looking at share price, IBM’s ability to generate cash, and the earnings statement. On those grounds, he’s right. He neither has the time nor cares to look any deeper. That’s why he’ll get caught with his fly unzipped on this one.
A few comments: To say that IBM deliberately cheated its customers oversimplifies what’s really going on. While cheating was certainly part of the game, there was also a LOT of wishful thinking on all sides. Both customers and IBM executives believed in things like “self-healing infrastructure”, “on-demand computing” and the like. Both IBM and its customers made massive investments in technology and services they did not fully understand. Sometimes the investments were profitable, and sometimes they were not. Let’s just say that the lack of understanding on both sides came at a huge cost.
If IBM becomes like Oracle, then it’s going to become a MUCH smaller company — and not just because of the loss of services. IBM hardware is no longer all that unique. They have mainframes and large scale storage, but in the distributed server space they’re just one of many players.
In software there is a similar story. IBM has some compelling products, but so do many other companies — not to mention the fine open-source and “free” offerings that are available in the world.
Lousy margins aside, one of IBM’s major value propositions over the years was that they offered an all-inclusive package. Hardware, software and the services needed to tie everything together. IBM sold a lot of hardware and software over the years using services as a loss leader. Without services, what’s IBM’s value proposition over Oracle, Microsoft, HP and everyone else? Why pay IBM the big bucks?
I’m not disagreeing with your proposition, by the way. IBM could very well become like Oracle. But in a world where both hardware and software are rapidly commoditized, what kind of player will IBM be?
If IBM without services is too small to be Oracle then perhaps Oracle is too optimistic a goal. How about CA? That’d knock the bloom of this earnings rose pretty quickly.
But to your larger point, IBM will still be able to sell an end-to-end solution, and will probably retain enough consulting talent to install it for you. That’s the best way to retain the value inherent in their position. I think they’ll keep the special gigs like DR and some government work just to stay flexible, but generic data center management and the like could easily be thrown overboard.
Regarding your first point, I think customers who have been burned in this have to own their roles. Pursuing cost savings by giving up a lot of control or hoping that new technology lives up to its billing is a risky game, and not everyone wins all the time. And looking forward, customers have to be realistic about what they can expect for a given amount of money. If it’s too little for their own staff to do the job then there’s something else in the equation that allows that work to be done while still allowing both profits and savings. It’s usually not realistic to credit all this to low wages, and frequently customers aren’t comfortable admitting how much quality might suffer or how little vendor penalties count when a business has been hammered by a major failure.
The changes to IBM are easier to imagine than the changes American IT has to undergo in the coming years.
“…probably retain enough consulting talent to install it for you.” Hah! Evidently you missed Roadmap 2015, which is dumping 85% of IBMUS and IBM Canada body-count. Anyone not directly client-facing, that is, not a salesperson, will be gone. Already today, we’ve dumped the US and Canada-based technical staff and sent the jobs to Poland.
Yep, it would be great to finally get rid of those 85% of C players who are not motivated and are stuck in 80’s/90’s engineering culture unwilling to accept any changes.
Sometimes I wonder if the press isn’t picking up on this because of all the money IBM wastes on advertisements – have ads blocked so I don’t know how many ads are on media’s websites… Media execs might not want bad press on IBM because IBM will pull out of their ads… /shrug
Thanks Cringley, for being a voice among many on the downfall of IBM. IBM leadership (pic) is a great example of squeezing all of the juice out of a lemon, and somehow they think they can sell lemonade.
“own infrastructure which is hardware and software”
And patents? I mean, it’d be the Oracle thing to do, and given the fine legacy of engineering they have developed, could fund lots of hookers and blow for those on the other side of the executive morality thermocline.
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This sure explains the purchase of SPSS. It’s a shame, I was hoping someone would improve quality and drop cost… I’m guessing it’ll be the opposite.
IBM is not being able to develop or market SPSS effectively. They don’t have the correct staff backing SPSS dissemination. If the old SPSS employees are still in IBM, they are hidden from outside.
This just seems to confirm the general idea that SLAs do little to protect customers. So the cloud service hosting our order processing system went down for 12 hours? How about a 1.5% discount on the monthly bill?
Downtime in cloud applications can be disasterous for the customer and merely inconvenient for the provider.
IBM software? IBM is where acquired products go to stagnate and die, kept on life support by yearly maintenance fees. Does anybody know any user (not manager) of IBM software that actually likes it?
My thoughts exactly. I’ve seen at least 6 acquired products get sucked into the IBM process and make the transition from something that did a particular task very well, to something that was so complex, it takes a room full of people just to install and configure it. IBM is good at making Rube Goldberg software which they hope will drive services business.
I actually liked AIX. But if you get the annual report you’d know they also don’t have nearly the margin on it as the awful software that doesn’t work.
Maybe IBM is just trying to be on the leading edge when the singularity gets here, to make it easier to reduce the headcount to 0…
I don’t mean to be crass but – so what?
IBM is downsizing. That’s unfortunate for their current employees and hopefully they will find further employment in another company.
But how does IBM going down the tubes affect me? Why should I care? What does IBM uniquely contribute?
Do you own IBM stock? Do you own an equities mutual fund? Are you lucky enough to have a pension plan? IBM stock is widely held, especially by institutions, and when this pig hits the wall, it’s gonna affect a lot of people– not just employees.
Does this mean I should buy stock in IBM’s competitors?
Their loss is another’s gain.
No, no and no.
Then why even bother commenting?
While you were busy admiring yourself in the mirror, the old IBM has created entire industries. Go Google “IBM inventions” and stop wasting our time.
Exactly. The new IBM means the end of all the technological advancements (like the HD) that the old one produced.
You should worry because of IBM’s latest mantra “become the worlds essential company” or something similar. So if you supply enough to enough governments and banks etc. then like them you become too big to fail. If IBM shut down tomorrow think of the mayhem.
Sounds like a great bedtime horror story, but I don’t think it’s correct. First, the reduction in US headcount will still leave 80-85,000 US Employees (20% of 420-450,000 worldwide employees) come 2015 – with the vast majority of them still involved in Services(GBS) and Strategic Outsourcing(SO/ITD). Outside the US, the majority of off-shore headcount is in these divisions. So – sell off Services and you shrink IBM dramatically. The remaining businesses won’t generate the revenue and profit needed. This is a case where the sum of the parts are greater than the whole (Hardware and Software need Services to continue to grow and thrive.)
Services is still a Cash Cow – as you called it. The best way to milk the cow is to improve the Profit Margin. This is being done by lowering HR costs via off-shoring and using the PwC hounds purchased in 2002 to cut other expenses. In addition, IBM management is “relocating” the employees to be closer to the markets where they perceive future growth in Services and Outsourcing. While this is painful to those that have been around IBM for years, it is the new norm in IBM’s effort to make Services more profitable. And Services is the gateway (drug) for improving HW/SW sales. I for one will be shocked if GBS arm is sold.
Realize this: The shift in how IBM manages the Services business is a reflection of either how much PwC has sold executive management on how to cut the bloated costs inside GBS – or how much PwC has taken over IBM. (I believe it’s the latter)
Very interesting. I hadn’t looked at PWC in this. Tell us more, lots more!
One other interesting tidbit – PwC was bought by IBM in late 2002 (or was it a merger – or even the other way around?). According to a 2002 CNet article, “As an incentive to keep PwC Consulting employees from leaving, the deal offers them stock options greater than what they could have owned through the IPO.” Those stock options would be expiring in the very near future. With IBM’s stock price languishing until last year, it would not be hard to envision some very unhappy PwC folks chewing their curd over not getting their “IPO payout”. This alone would be enough incentive for PwC to drive these cost cutting measures.
Also – This acquisition bloated GBS from 150K to 180K employees. To some degree, the multi-year “bloodletting” of US workers and redistribution to cheaper off-shore help(??) has always been part of the plan since the PwC deal.
Finally – look at who was running GBS in 2002 when this deal was struck – Ginny. She is running IBM today. Yet another reason why I find it hard to believe that IBM – Ginny – would sell off this division. What you see are cost cutting measures to improve the profit margins that are paired along with a massive multi-year stock buyback to drive up the EPS numbers. Both are having the desired effect of increasing the Stock Price and giving the legacy PwCers the IPO-like payout they were promised.
Did I forget to mention that those stock options expire at the end of this year? Even Warren Buffett has this play figured out.
The Consultants from Price Waterhouse Coopers are all gone. Most of them stayed for one year just to get their bonus’s for staying though the transition.
They hated the IBM culture and process bullshit and left to go to other consulting companies. They may have been a talented bunch but IBM never got any benefit.
PWC turned out to be a huge waste of money like when IBM bought ROLM phones.
When IBM acquired PWC (IBM insisted on calling it a “merger”), two things happened: One, the top PWC consultants left in droves. In some cases whole departments, taking their customers with them. Two, many good managers from IBM’s service organization also left, either for other organizations inside IBM or taking up jobs with competitors. They could see what was coming. That should have been a warning sign.
In the management ranks, many of the PWC guys who stayed were not exactly the cream of the crop. Unfortunately, they were allowed to run the show in GBS more or less, and further generations of IBM managers adopted their “style”.
Don’t get me wrong: A lot of good ex-PWC people stayed, too, but together with the good IBMers they were powerless against the degradation of internal culture.
Slowly, but steadily, being knowledgeable the technologies and solutions we sold became unfashionable. If you raised concerns about the solution promised to the customers, the project plan, or the estimates, it wasn’t viewed as proper risk management anymore. You were considered a “trouble maker” who is “lost in the details” and “not seeing the big picture”. Preparing proposals and solutions was done in a shoddier and shoddier way every year. It became so bad that often even the most basic solution design steps were scrapped and proposals just slapped together in a copy-and-paste fashion. In today’s GBS culture, attention to detail and quality is actively looked down upon by many a “manager”.
The perfidious thing about this “strategy” is that the remaining knowledgeable, “good” guys often work(ed) their asses off trying to deliver to the customer. Of course, nobody thanks or rewards them for that. On the contrary – their dedication is seen as an incentive to squeeze even more out of them. Burnouts are on the rise, I presume.
Bob, if you have the contacts, try to get IBM’s internal employee satisfaction surveys from the last years. They show a steady decline since 2004 (!), down to numbers which are so far below the competition’s that you wouldn’t believe it. These reports are known to IBM’s leadership. The fact that they chose not to act on the results is proof enough for the validity of your articles.
Yes, I believe this. PWC has also shoved their ridiculous Career Point PA (Project Assessment) process down the throats of everyone in Services. It’s basically a duplication of the PBC (Personal Business Commitments) process. So, now we have two assessments to worry about instead of one. The PA is mostly a tool that’s used against employees to ensure they are never promoted. However, these days, nobody wants a promotion, anyway. It’s a sure way to expedite your RA.
“…(20% of 420-450,000 worldwide employees) come 2015 – with the vast majority of them still involved in Services(GBS) and Strategic Outsourcing(SO/ITD).” Wrong. Roadmap 2015 dumps 85% of IBM US and IBM Canada staff. GBS senior management has already told the US staff to look for other jobs as they’re on the chopping block. SO is already dead: the jobs are being off-shored to Poland, Italy, Argentina, China, India. IBMUS staff are training their replacements right now.
I was “training” my Brazilian replacements 5 years ago, but the 2 months of my layoff notice were not nearly enough time. I heard from my manager a couple years later (when getting a ref for my current job with a somewhat more humane company) that the customer demanded the support be brought back to the US – they got that with the US guy I had been mentoring for a couple years before the layoff, so that probably did work better, but I wonder if he ever got anyone in the US to back him up. I have my doubts that he is avoiding that burnout situation.
If it’s the project I’m thinking of, the gringoes involved with it left in 2011.
(The better Brazilians left for the greener fields of academia).
A business model that is all too tempting I suppose. Where are the real innovators that create and develop?
At the small end of things I remember buying (fool me, eh?) Lotus Organizer 6.1. Yes, an third-party acquired title but it was good in 1999. Did what very little other software could. It’s still for sale on their site but at 13-years old has had no real, useful updates in all that time. Oh, pardon me, they’ve just declared it to be 64-bit compatible and will support it’s use. 13-year old software?!
This story also reminds me how awful the Oracle software I’m forced to use at work is. Just can’t figure out why it is so popular globally! Are corporations mad?
So if both companies carry on as they are let’s hope the real innovators get the upper hand! 🙂
Gerstner merely delayed the inevitable at IBM.
He beat out C. Michael Armstrong (career IBM’er) for the CEO job because C. Michael Armstrong advocated breaking up Big Blue.
C. Michael Armstrong, true to his vision went to be CEO of both Hughes Aircraft and AT&T and broke them up (liberated shareholder equity) and sold off the pieces.
CEOs who can build a business up are rare now a days.
IBM will be a marketing name for some Chinese manufacturer in a decade or so.
Ah yes, I remember Armstrong’s days at AT&T, when the company was known as ‘Armstrong and Two Temps.’
That breakup helped to spawn Carly Fiorina, among others.
Carly, who did Lucent no favors, and later Alcatel/Lucent, and HP..
let’s not forget some of the others vying for the top of the Death Star at that fateful time.
“Evil Joey Nachos” Joe Nacchio, who tanked Qwest, got fired, and has two years to serve in federal prison on insider trading.
Robert Annuziata and Leo Hindery, who went to Global Crossing and rode that one into the ocean deep.
there were a couple other shooting (sp?) stars from that fabled time that were trained and schooled to pull defeat from the jaws of victory. suffice it to say, not the greatest period of corporate bench depth in history.
Look like Oracle hah. At least what Oracle develops and sell works and is relatively defect free. Can’t say the same for IBM.
You kidding? Oracle software, apart from maybe RDBMS, is completely horrible, overpriced, and the support is completely inadequate.
Maybe the North Korean news wire will pick up your news story, Bobby.
That has to be one of the ugliest nastiest comments I’ve read at any site in a long time. Kudos to Brook Jacoby for setting a new low.
It’s a joke. No need to draw more attention to it. 🙂
If you can’t see the ideologically driven spite behind that comment, you are truly dense. This is what you get in America today for speaking out for workers–even white collar workers, it would seem.
That’s why it’s (almost) funny. Back in the 60s we would use “Pravda” as an example of propaganda masquerading as news.
I think we have a perfect model for slow decline into obscurity and irrelevance:
Unisys.
Same suits, same thinking, same results.
The only question is whether or not IBM management will attempt to repeat their pre-1991 antics, avoiding/hiding problems until there’s a catastrophic implosion.
Denial and Avoidance are necessary and even great coping strategies, right up until Reality steps in and you’re suddenly no-more.
Not to mention the bonuses.
How could IBM possibly aspire to the likes of Oracle without an Uncle Larry?
I just sold all of my IBM stock. Jumping this Titanic before I not only get screwed out of my job, but my money. There is no Carpathia in sight…so sad. When I joined this once-great company I was so proud to tell people that I worked for IBM. Not so much anymore. And me, a person who is as loyal as a dog…can no longer find any hope in this mess that is driven by pure GREED. I hope you are happy with yourselves, blood-sucking corporate vampires.
Welcome to the world of PwC Management Consulting. They are running the show – at least in GBS. LEAN, Global Deployment Facilities (GDFs) and under-the-radar layoffs are all trademarks of a Management Consulting firm mentality. Does it translate 100% to greed? Maybe, but the bean-counting MBA’s just love how sexy it makes the financials look. And as an added bonus it boosts the stock price and really rakes in the money for those with stock options.
You’ve stolen the show. You really have. Sincerely, well done.
THIS. When I say I’m with IBM nowadays, i usually amend it with a “i’m sorry”.
Speaking as a present IBM’er of over a decade, I’ve been part of our ‘dot com’ generation for my duration of my employment thus far.
I remember starting in a role here at IBM covering US complaints from Canada and within 2 years…egad! I’ve been moved. The role, constantly under threat from the ‘sponsors’ from the US, won the right to bring the roles back within the US. My naivety at the time didn’t realize that ‘Canada’ was the outsource location of choice due the low CAD$ vs US$.
That role persisted for me in another guise; Canadian now serving Canadian clients, for another year. That persisted until I jumped ship into a role I held for years, and will maintain is the largest group of cheats at IBM; Software Renewals.
I came into that business as it was just ramping up after the acquisition of Rational software, with the intent to grow the stream of ‘insurance’ by BILLIONS over the course of a decade.
Over the next 7 years, I saw acquisition after acquisition, all to plump up the portfolio and shoddy pricing all the way through. Things started to come to a head with Cognos several years ago and clients would see 500% increases YTY on their ‘insurance’. Some retarded pricing schema was lobbed into place which caused the majority of these clients to see absurd jumps. But not to worry! IBM, instead of FIXING the price and aligning it better, went ahead to LIMIT the increase to a mere FIFTEEN PERCENT YTY until clients reached this ‘new’ upper limit.
After dealing with dozens of irate clients (ranging from Canadian to US) and the model replicating itself with every acquisition I had had enough and left to another role, which I can say is satisfying but still within, what I like to call ‘IBM’s bastard son’, IBM dot com…or now known as Inside Sales.
The sentiment here is that of apathy. And has been for years. Often the ‘short end of the pointy stick’ is seen and felt here, and many hundreds have been let go through forced fir- I mean ‘resource actions’. We’ve been asked to do with less and less. Less recognition, less resources, less space, less time, lesser equipment. All compounded with the fact that the upper levels OUTSIDE of this arm of IBM only see us as the dumping ground for the deals too small to be bothered with, or the trivial mundane tasks of admin and paperwork.
Entire teams are scrutinized for obscene metrics. Ridiculous targets. Lousy tools. Overworked managers. Poor managers and bad managers (there’s a difference.) All while being told how integral, important, large and essential we are to the larger IBM.
If we are, it certainly doesn’t show…either in moral, actions, awards, rewards or tangible items. I’m in sales…not doing charity work with the nuns of Calcutta…but some days, it feels like it.
Thanks for the articles Cringely…it’s appreciated on the inside!
You’re not connecting all the dots Bob. IBM’s big customers are the too big to fail banks and the giant corporate welfare queens. Even if IBM loses money for its customers, the customers will just get the taxpayers to pick up the tab. Money is no object since it’s your money, not theirs.
On the other hand, there are important policies like increasing structural unemployment in America, which helps keep wages down and productivity up. Make the populace afraid to quit their jobs, and keep them in line working longer hours for less pay. IBM’s customers demand that IBM play this globalization game if IBM knows what’s good for them. So don’t hate the player, hate the game.
Nice to see someone else “gets it” here.
Between the Federal Reserve System (1913), the Income Tax on Natural Persons (1913) , and the perverted legacy of Supreme Court Justice Stephen Field (1886), we’re sunk.
We didn’t get to where we are today, overnight. The groundwork was laid starting over a century ago. Saying we’ve got some real work to do to fix this system is the understatement of the year. Total system collapse might be the only way out.
“Specifically, IBM modeled two competing scenarios: 1) follow service agreements to the letter, and: 2) ignore service agreements thus saving money and expect to pay penalties as a result. IBM decided it could make more money — a lot more money — by paying penalties than by actually doing what it was being paid to do.
One individual was rewarded for this stroke of genius, by the way, sanctifying what could be one heck of a class action lawsuit.”
I’m wondering what your source is for this information. Someone on the inside? Industry hearsay? Surely IBM wouldn’t have the stupidity to publicly admit to something like this.
It’s been very sad to watch the effects of offshoring over the past several years. In the beginning, the most painful and obvious effect of moving tech manufacturing and support overseas was the loss of jobs that resulted. At the time, I worked at a call center that had a 1,200 seat account with Compaq. Although I wasn’t on the Compaq account, everyone in the company took a pay cut to avoid laying off those 1,200 employees when HP bought Compaq and moved all tech support overseas.
The long-term effect, though, is that American companies are teaching foreign companies how to build great computers and cloud-based services and how to fix them when they go wrong. Bit by bit, we’re giving our leadership position away and creating new tech superpowers in India and China, and no one seems to care.
They care all right. Remember the Chinese waiter who funneled hundreds of thousands of dollars to the Clintons in the 90s? He got caught, but there are hundreds of other “lobbyists” making sure that this business goes to countries like China and India. Your politicians are getting rich off this “free trade” madness, so they care. To them it’s a feature, not a bug.
Our Indian system hinders creative team work and big-picture solutioning. Their is also the belief that an engineer from any field or an MBA can do any job because they did well in college entrance standardized tests.
Unless IBM places expats or Oecd/American-trained managers and trainers in their offshore teams, the quality of services will decline further.
At present, feedback from the offshore services teams will not reach the product teams in the US because, in India, we work in extreme silos, a legacy of the caste system- the teams delivering SPSS services will not tell the SPSS product team of common problems they encounter.
basically, at some stage, IBM will have to bring in high-expense expat managers into India. Per Diem, hotels, service apartments, chauffeurs, etc. This cost must be incurred to ensure quality.
Time for a brief reality check: When I was with IBM, I saw strategic outsourcing deals from multiple angles. I’ve seen deals being negotiated by the sales and customer executives, and I’ve seen deals in place that actually had to be serviced. I participated from both sides of the fence.
As has been reported by many observers, there were (and probably still are) multiple disconnects between the sales side of the house and service delivery. Deals (service agreements) were written with a LOT of wiggle room. They had to be — if deals were written with the detail expected by your typical IT specialist, programmer, what have you…then the deal would never get done. The details would be too many to mention in a contract.
In some deals, there would be line items like “Manage 50 UNIX servers” or “Maintain backups for 25 Windows servers”, with absolutely no accompanying detail. No backup schedules, no retention requirements, no up or downtime specifications, etc. The idea was that those details could be filled in later on, but often they never were.
As you can imagine, this often became a recipe for chaos.
IBM’s problems in outsourcing come from a fundamental conflict between 3 things: What was agreed to in the contract, what is actually expected by the customer, and what can be reasonably AND PROFITABLY delivered by IBM.
Sometimes, this conflict could be resolved. Oftentimes, it could not. The bottom line is that a lot of deals were signed that didn’t bring in enough money. In such cases, IBM executives made decisions on what they could do within the bounds of each contract. For some deals, IBM would take a loss and deliver to customer expectations. For other deals, IBM would wiggle out of it somehow, often paying significant performance penalties. It’s no secret that corners were often cut so that the deal could be serviced.
It is nice to think that “IBM should live up to its social promises and do the right thing, no matter what”. Such expectations are not realistic. At the end of the day, IBM made a lot of the hard economic decisions that their customers were either unable or unwilling to make for themselves. That’s what you get when you outsource your operations.
I might tend to agree with the 3 problem areas you mention if it wasn’t for the fact that every new account wasn’t a complete mess. If IBM cared about they’re customers or their reputation they’d do something to resolve these issues.
Reality check: The reality is even if IBM were able to write a good contract with clear expectations they still couldn’t deliver because as Cringely already pointed out “The process is the cancer” and IBM’s answer to every problem is to create a new process.
Example:
1. Takes 6 tickets for one change. 3 native customer tickets per change, than 3 native IBM tickets to track the 3 customer change tickets. Multiply this 6 ticket process by 5 groups included in the change and you now have 30 tickets opened and closed for one simple change or install.
2. Takes anywhere form 2 weeks to 2 months to get Id’s created needed to logon and manage an account. Usually you’ll spend half day just trying to find the process needed to get Id’s and another half day trying to find the right groups to do the work for you. This will all vary for each account and changes constantly so it may take longer.
IBM’s Global Delivery model is completely broken and won’t be fixed because no one above the 1st or 2nd line manager wants to hear it. If by chance someone does point out the model is broken and doesn’t work the response is, you’re not following the process so they add some new process to help ensure the old broken one is being followed correctly.
I agree that IBM’s delivery models are often broken. I’ll respond to your examples with a bit of half-a**ed explanation as to why things are the way they are.
When IBM’s outsourcing business started, there were two huge problem areas that management needed to urgently address: Accounting and Accountability. As the outsourcing deals progressed, there was lots of activity. Much of this activity was covered by the service agreement, and a lot of it wasn’t. It was the part that wasn’t that concerned IBM’s management — for although the activities made sense in terms of servicing the customer, it was something that wasn’t part of the contract and IBM wasn’t being paid to do. Sometimes, this “unauthorized” activity wasn’t even authorized by the customer’s own executives.
In a typical self-managed IT shop, “creating user IDs” and “making changes” are often handled as business-as-usual activity, with minor change control and tracking if there is any at all. If you need something done, you find the right people, contact them and they do it. If there is a problem, you work things out between yourselves and “do what it takes to get the job done”.
As part of an outsourced deal, this was considered unacceptable. Every activity that took place within the deal had to be approved by someone (for accountability) and tracked (for proper accounting). So over the years, IBM consultants, project managers and executives created vast systems of change control processes and procedures. The goals of accounting and accountability were indeed met — but there was a huge drop in productivity. Activities that were once routinely handled in an instant were now huge productions, requiring approvals and notifications of God knows how many people before completion.
As operations spread across multiple delivery centers, the drops in productivity became even more pronounced. Activities that were once handled within a single delivery center (e.g. RTP or Boulder) were now handled across multiple delivery centers, each with their own responsibilities. As operations spread to offshore sites, there were additional issues. Communications and cultural differences became problematic sometimes. Language was an obvious barrier, but so were vacation schedules and off-days. If you’re in the US needing something done quickly, it’s no good to be told that your counterparts in France and Germany aren’t around because they have a mandatory vacation day or national holiday.
At the time I left in 2010, IBM management had been working to eliminate personal contact between groups. For a lot of stuff like creating server IDs or managing network devices, you had to submit requests on an internal website. Each request would go to an anonymous person somewhere in the world, who would do the work and respond to you when the work was finished. Communication was via the website, or by anonymous e-mail using a common address. I remember playing detective sometimes, trying to figure out who was responding to my own service requests. That way, I could contact them directly by e-mail or telephone when issues arose. You can imagine how this level of “personalized” service impacts productivity.
That describes exactly the recent for upcoming paths my agency is taking. The ability to get the work done is stripped from us by removal of access, removal of tools, compartmentalization of tasks to the exclusion of cross-training, and layering ever-increasingly complex processes over the top of the simplest of tasks.
I’ve been in IT for nearly 40 years (and in one agency or another for 36), I can’t take it any more. SLA that can’t be met BECAUSE of the processes heaped on after those SLAs were negotiated, no mobility because of the compartmentalization, morale that’s in the dumpster throughout the agency.
I don’t want to quit. I love the work. I can’t stand what it’s turned into. I’m out.
Sounds just like the Fed agency I work for. Everything is process, process, process, all to generate a bunch of management reports that have almost nothing to do with what is actually happening in the real world. “Get the job done and keep the user happy” has become “Follow the process, hit the completely arbitrary SLA’s and who cares if the work gets done or the user is happy”. It’s hard to believe even a Suit could thing this is progress, but somehow they do.
Sounds as if the end state at IBM will be the IT equivalent of life in Terry Gilliam’s Brazil.
Similar problem with our installs – IBM takes support for the production database servers but leaves development to its own devices. But customer assumes all database servers are supported. So when we need a change to the database on development we can’t do it (no access), customer can’t do it (no experience) and support can’t do it (no contract). On occasions a minor update has circled round for literally weeks, holding up development (which holds up deployment to production). The trouble is IBM then says development is taking longer because of customer failings and so wants more money. So there is no incentive in IBM for us to sort the situation out – IBM values were junked long ago.
I might tend to agree with the 3 problem areas you mention if it wasn’t for the fact that every new account wasn’t a complete mess. If IBM cared about they’re customers or their reputation they’d do something to resolve these issues.
Reality check: The reality is even if IBM were able to write a good contract with clear expectations they still couldn’t deliver because as Cringely already pointed out “The process is the cancer” and IBM’s answer to every problem is to create a new process.
IBM’s Global Delivery model is completely broken and won’t be fixed because no one above the 1st or 2nd line manager wants to hear it. If by chance someone does point out the model is broken and doesn’t work the response is, you’re not following the process so they add some new process to help ensure the old broken one is being followed correctly.
[…] And here he offers some last words about what all of this means […]
Watching for the RXC article about which companies or at least the tactics that will enable others to snatch all the profitable customers from IBM. if it’s a bad business plan, then there is an opening for a predator in the ecosystem. If IBM looks like Oracle, will they be direct competitors?
Also looking for feedback on how US and Canadian workers can be more competitive. My guess is by eliminating office space and commute/travel costs, and by leveraging employee’s home infrastructure. We’re already seeing a transition in tech-driven companies to BYOD – bring your own device. Why drive to an office to use your own device?
And why provide office space and hard infrastructure for employees to use their own devices? It’s a huge overhead cost that goes UP, percentage-wise, after layoffs. Companies should be laying off buildings before they lay off any employees.
This doesn’t help for manufacturing, but for those using phones and screens it can cut costs significantly. And not having to commute daily is like getting a huge increase in salary. Cutting employees’ costs has to be part of the equation.
A lot of us already work at home. Slowly over the years they have been cutting what they will allow us to expense to support the home office. The most recent being no reimbursement for internet service. Their reason was that most people have internet for personal use, so there was no burden on the employee to obtain internet. Should there be a burden, the employee is more than welcome to come back to the office and work there. They know good and well that we at home don’t want to go back to the office.
As far as huge increase in salary working at home, I say HA!!! Always worked from home (13 years) and salary raises are typically less than 2% a year. I have stay with IBM because I believed it was a good company and I have a very strong network of colleagues I enjoy working with, but the moral lately really stinks.
IBM is going the opposite direction from tech-driven companies. The current plan is to send all work off shore. Any work that can’t be off shored will be done from one of the Global Delivery Centers (GDC). If you’re still working on an account from home there’s a pretty good chance it will eventually be moved off shore or into one of the GDC locations where you’ll be asked to relocate or lose your job.
IMHO, All of this off-shoring of jobs will stop as soon as the economy turns around and companies start spending REAL investment money again. These companies that have “saved” all this money through the direct or indirect use of lower-cost off-shore resources have long known that this situation has produced lower quality products and services. In other words, they are getting what they are paying for. Once spending of REAL money resumes, these companies will want REAL quality results. That will result in on-shoring and in-housing of these resources. I even believe we will see a resurgence of the 1970’s/80’s style of micro-management. After years of getting shoddy work at discount prices, companies will demand that these resources work from the office where management can keep an eye on what they are doing and ensure the quality of the work they are producing.
If IBM execs also see the same writing on the wall, they may actually be doing what RXC suggests – getting poised to sell off the GBS division (though I still doubt it).
Working from the office doesn’t mean quality work just look at IBM. Accounts being worked from the office are just as bad if not worse than the ones being worked from home. Just because you can see someone sitting at a desk for 8 hours doesn’t mean their working. Good management along with good good employees ensures quality good work. If someones a slacker at home they’ll probably be a slacker in the office as well.
IBM has the right to do whatever they think is best for the company including off shoring work. The issue is not work going off shore but the quality of work received off shore and the damage it’s doing to IBM’s reputation in the end.
The good news is despite the bad economy there’s still plenty of work out there if you have the right skill set.
I didn’t mean to imply that IBM would be on-shoring and in-housing. Their clients will be doing it – and kicking IBM Services division to the curb. IBM will then morph and find the next profitable revenue stream – or they will fold.
I fully expect that once these companies (IBM’s current clients) in-house and start paying for employees at full price again (<– that is the key), they will try to ensure they get their money's worth by requiring people to work in the office again. The Micro-Management will come with the initial wave as these companies start to admit that they got shoddy work product from the lower-cost off-shore resources. Not initially, but over time, better management practices will prevail – as they must to attract high-quality talent.
Again – I am just stating my own educated guess here as to what the future holds. I have held to this theory since I developed it in 2005. My initial target for this shift in the wave of off-shoring/out-sourcing was 2010. But the economic downturn in 2008 forced an extension to that target date. Now my target date is tied to the economic recovery that will come following this recession/downturn. It will be predicated on US companies deciding that they are ready to spend money and invest significantly in their business again.
“Inshoring” is already happening: http://en.wikipedia.org/wiki/Inshoring
And I suspect a significant source of employees for this will be former (or soon to be such) IBM’ers.
The economy seems unlikely to ever “come back” to what it was before, but the transformations already under way will be new potentials for those who can adjust.
You really should stop consulting the “Book of Knowledge”. All the references in that document were from 2004.
Perhaps you thing that the Easter Bunny and the Tooth Fairy will come on the sled with Santa and convince all the IBM Execs that IBM’s soul is more important than their mulit-million dollar bonuses and stock options. That they are a US company and that their US employees are what made them what the were when they were a respected and honored company, when IBM meant something positive. When people were proud to work for IBM rather than depressed by it.
Sadly, your analysis of IBM is on the mark. We are witnessing the dismantling of an iconic business right before are very eyes. It’s disturbingly similar to the fate of IBM’s once fiercest rival – Digital Equipment Corporation (DEC who?) – after Robert Palmer replaced founder Ken Olsen as President and proceeded to eviscerate the company.
IBM is still a viable business largely due to the superheroic efforts of its remaining gallant, valiant, blue-blooded employees, who continue to do everything within their power to deliver services, despite the walls and ceilings and floors of the enterpise crumbling around them, and despite the possibility of being “resource actioned” at the drop of a hat.
When those employees are gone … game over.
As you’ve stated, though, there is hope. This does not have to come to a bad end. Decisions can be made, and actions taken, to right the ship. However, these decisions will not be made willingly by the current regime. It will require enormous pressure from within and without: employees and like-minded management (some do exist), industry pundits and prognosticators, investors, traders, and stakeholders from all corners will need to wipe the accounting gimmickry and Wall Street pixie dust from their eyes, shouting at the top of their lungs — “The Emperor has no clothes!”
All of this is necessary to avoid yet another great American business tragedy.
Well said Voxerian
“IBM decided it could make more money — a lot more money — by paying penalties than by actually doing what it was being paid to do.”
One of the many bad consequences of this is that security goes in the toilet. If you want to know why so many big organizations are getting hacked, one major reason is IBM.
At the top of this blog is a set of advertisements. One of them was this:
“Free IBM Guide Book Get Your Free Copy of The IBM Book For Performance Managers”
Freak’n hilarious!
Bob,
IBM doesn’t want to own anything – ownership implies accountability and responsibility. IBM wants to control the datacenter, place its products and let the owner (customer or a future buyer of IGS) live with SLAs (or the more infamous Service Level Objective)
A friend of mine says: “Own nothing, control everything” It is his financial model and makes him pretty much untouchable financially.
From: RMAC COMM/Armonk/IBM
To: Employees – 011, Employees – 012, Employees – 013, Employees – 014, Employees – 015, Employees – 016, Employees – 017, Employees – 018, Employees – 019, Employees – 020, Employees – 021, Employees – 022, Employees – 023, Employees – 024,
Date: 05/01/2012 08:16 AM
Subject: Announcing IBM’s new Transition to Retirement program
Dear IBMer:
IBM is pleased to notify you of your eligibility to apply for a one-time, voluntary program for IBMers in the U.S. nearing retirement. Called Transition to Retirement, it offers a gradual way to retire, with advantages for both you and the company.
If approved to participate in the program, you’ll receive 70 percent of your current pay while working 60 percent of your current schedule. You’ll also receive the same benefits you do today, most at a full-time level, including health insurance and 401(k) Plus Plan automatic company contributions. Due to the experience and skills you possess and the business need to close the gaps your departure would create, you’ll be exempt from any resource actions that may occur during the Transition to Retirement period. You agree to retire on December 31, 2013 — or earlier, if you choose to do so.
IBM is offering this program to address issues facing American businesses and employees alike.
In recent years, American workers, including IBMers, have been asking for ways to gradually ease into retirement – maintaining a certain level of pay and benefits while freeing up time to explore what to do in their next phase of life.
At the same time, businesses, including IBM, want the ability to forecast when employees may retire so they can better plan.
The Transition to Retirement program was designed to address these issues. We believe it balances the needs of our U.S. retirement-eligible employees with the needs of our business.
For you, it provides a way to scale back on IBM commitments so you can explore what to do when you retire, whether that involves a second career, volunteer work or other meaningful ways to fill your time.
For IBM, it provides advance notice of when IBMers will retire, giving managers time to work with their teams to identify key skills and knowledge, while maintaining commitments to our clients and the business.
Financial planning and retirement resources – including MoneySmart seminars, individual coaching sessions and other programs — are available to help you decide if Transition to Retirement is right for you. Much more information, including eligibility requirements, start dates, resources and application procedures can be found on the w3 Transition to Retirement for Eligible IBMers resource page.
Whether you ultimately decide to participate, IBM encourages you to use the resources available to help you plan what you’ll do when you are ready for that next phase in life.
Sincerely,
Randy MacDonald
Senior Vice President, Human Resources
You guys are toast!
Corporate translation:
“Bend over further, ok a little more, no…. you have bend over all the way…
“Ok, we’re going to put this in with no Vaseline!”
And so it begins
70% of pay for 60% of work
Bob writes his columns and IBM starts dumping people
https://www.computerworld.com/s/article/9226750/New_IBM_retirement_program_guarantees_job_through_2013
IBM’s Offer To Older Workers: Either Take A Pay Cut, Or Risk Being Canned
http://articles.businessinsider.com/2012-05-01/news/31513305_1_early-retirement-ibmers-older-workers
This is a nice move to dump the expensive pension-load of the experienced staff so the scraps of IBM US and IBM Canada will be cheaper for a buyer come 2015 or so…
It is not possible to cut your hours. The 30,000 people eliminated in the US in the past few years have not reduced the work burden. The work is done by fewer people working more hours. Who are they kidding?
And finally another article:
https://www.businessinsider.com/ibm-early-retirement-ripoff-2012-5
Cringely, you got it right a few columns ago. IBM is a “sales” company.
They sell to the press, to the government, and to their employees, in addition to their customers. They used to be interested in solving their customers’ problems. The only customer problem they’re interested in solving now is: how much money does the customer have, and how do they get the most of it for the cheapest cost to them?
I was at a conference for the highest-performing technical folk in the company a few years ago (the last one they had; 2007, 2008, maybe?). In the exec Q&A, techies were asking for advice in how to stay current in technology – a requirement – given no time or access to tools or education. And in answer, Nick Donofrio – the “godfather of the technical community”, who reported directly to Sam Palmisano – said (I quote): “Your jobs are going to wherever they are cheapest on the planet. Get over it.”
About the same time, at an IBM Academy of Technology meeting – which only the so-called technical elite of IBM attend – Nick told the attendees that IBM had just hired 15k people in India. Problem is, they couldn’t identify the technical leaders amongst them. What he wanted the attendees (us) to do, is to identify the technical leaders amongst those Indians, and mentor them. I.e., to outsource ourselves.
These are the same execs that keep talking about how the US needs more highly skilled workers. These are also the same execs that have laid off a number of employees that asked for a few unpaid months off, in order to finish technical PhD’s that they have been paying for out of their own pockets. If the execs are telling the top techies in the company this, what do you think their attitude is to the rest?
This has been a strategy that’s been playing out for years. The path has not changed, and neither has the hypocrisy.
On another topic:
In 1999, IBM froze the pension plan. Now they’re pushing the last of the employees on those old plans out. I remember reading some provision in the law whereby once the number of people covered by a pension plan drops below some bar (number? percentage?) a company can “cancel” their pension plan completely, and remove it from their balance sheet. With the newly announced “transition to” plan talking about it allowing improved business planning, I’m wondering if 2014 is the year we’ll see that happen? – a plan that’s taken 15 years to play out.
And then, the only employees left will be truly variable costs. Other than the executives, of course. The only way their costs vary is upwards.
Great post ‘gone’. It’s important to name names as it breaks down the big blue corporate wall a bit.
As an old IBMer (since resource actioned for cheaper Argentine “talent”) I was marveling one day at the cluster (fill in the blank) that the current project we were then working on had become. Another old blue “customer facing” dude gave me this sage advice: “Don’t confuse sales with implementation.”
” ….IBM decided to deliberately cheat its customers. The result is today’s IBM, rotten to the core.”
not only but also
USA decided to deliberately cheat its citizens. The result is today’s USA, rotten to the core.
ANY area –m law education health commerce
Its starting….
Dear IBMer:
IBM is pleased to notify you of your eligibility to apply for a one-time, voluntary program for IBMers in the U.S. nearing retirement. Called Transition to Retirement, it offers a gradual way to retire, with advantages for both you and the company.
If approved to participate in the program, you’ll receive 70 percent of your current pay while working 60 percent of your current schedule. You’ll also receive the same benefits you do today, most at a full-time level, including health insurance and 401(k) Plus Plan automatic company contributions. Due to the experience and skills you possess and the business need to close the gaps your departure would create, you’ll be exempt from any resource actions that may occur during the Transition to Retirement period. You agree to retire on December 31, 2013 — or earlier, if you choose to do so.
IBM is offering this program to address issues facing American businesses and employees alike.
In recent years, American workers, including IBMers, have been asking for ways to gradually ease into retirement – maintaining a certain level of pay and benefits while freeing up time to explore what to do in their next phase of life.
At the same time, businesses, including IBM, want the ability to forecast when employees may retire so they can better plan.
The Transition to Retirement program was designed to address these issues. We believe it balances the needs of our U.S. retirement-eligible employees with the needs of our business.
For you, it provides a way to scale back on IBM commitments so you can explore what to do when you retire, whether that involves a second career, volunteer work or other meaningful ways to fill your time.
For IBM, it provides advance notice of when IBMers will retire, giving managers time to work with their teams to identify key skills and knowledge, while maintaining commitments to our clients and the business.
Financial planning and retirement resources – including MoneySmart seminars, individual coaching sessions and other programs — are available to help you decide if Transition to Retirement is right for you. Much more information, including eligibility requirements, start dates, resources and application procedures can be found on the w3 Transition to Retirement for Eligible IBMers resource page.
Whether you ultimately decide to participate, IBM encourages you to use the resources available to help you plan what you’ll do when you are ready for that next phase in life.
Sincerely,
Randy MacDonald
Senior Vice President, Human Resources
Today’s AP News: “May 15, 2012…OMAHA, Neb. — Warren Buffett’s company has revealed a number of changes in its U.S. stock portfolio, including boosting its holdings in Wal-Mart and IBM…”
I don’t dispute any of the personnel projections but I think IBM is not going to be able to achieve them because of it’s gamble on Cloud Computing, Data Center Virtualization and various “SMART” projects. These projects will require elite albeit lean teams of professionals to develop. In other words, CCIEs, IBM Fellows, PHDs, etc. With these people comes their entourage of project managers, procurement people, real engineers who have actually built or worked with this technology (PHDs and the like do not they sit in rooms and drink coffee speaking in the latest corporate Cant), and glorified secretaries. I do think this is still bad news for the US though because this can easily be done in Germany were that type of staff abounds and where much financial power is now concentrated. The Irish should always benefit with their vast skilled workforce that speaks English (er kinda 🙂
Discuss!
I love to get letters with U.S. commemorative stamps on them; I collect these. How are your letters stampedor are they metered (yech)?
Hello,
I have read a couple posts and it worries me.
I’m currently finishing up the interview process for IBM Consulting by Degrees program in Canada and seems like I will be getting an offer. What are your thoughts on this program? Does this program lead to a bright future like they promised or it is simply a dead end job? Note that I’m interested in IT consulting and difficult technical work, not so much on management consulting.
Your response will be much appreciated as they will be taken into consideration for my final career decision.
The discussions happened long time back but sounds so prophetic now. Given that STG is out , is GBS next on the cards?Offshore news is sobering. Recruitment in Band 6 and 7 are near zero.Attrition is climbing on grounds of no hikes for most in the last 2 years. Just wondering whether the crowdsourcing comments in a magazine back in 2010 are finally coming true in another form.
This is true and It will happen by the End of year 2015. There is no hikes from so many years and it is on loss also.. Hope it will be good for IBM GBS employees if Oracle is acquires.
[…] in 2012 in which he predicted IBM’s (IBM) ultimate demise because the company was “rotten to the core.” To increase profits, he said top management had made the conscious decision to […]
Hmmmm… Whats up buddy? How is IBM doing know. Looks like lot of changes are occurring.
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