Cringely Predicts IBM Will Shed 78% of US Employees By 2015 273
Third Position writes "Cringely with more predictions about IBM: 'The direct impetus for this column is IBM's internal plan to grow earnings-per-share (EPS) to $20 by 2015. The primary method for accomplishing this feat, according to the plan, will be by reducing U.S. employee head count by 78 percent in that time frame.' So far, Cringely's pronouncements about IBM have been approximately true, even if he missed the exact numbers and timeframes. Is he right this time?"
Brilliant! (Score:5, Insightful)
Re:Brilliant! (Score:4, Informative)
If Cringley's numbers are approximately correct, I don't think IBM can get to a 78% reduction in 3 years using their current strategy of staying below the reporting requirements for layoffs.
Re:Brilliant! (Score:5, Insightful)
Re:Brilliant! (Score:5, Insightful)
Nortel went through that stripping itself off profitable business units that were not making as much money as they want.
I guess they haven't figured that the management division was the prime under-performing department except at the end when the filed for bankruptcy.
Re: (Score:2)
Well, up until they had no other divisions left, the management division was the most profitable one, because all profits were attributed to that division. Even if every other division had a loss, management was always highly profitable.
Re:Brilliant! (Score:5, Informative)
It's called a death spiral. It's something that happens to a lot of companies actually where they start jetsoning their "underperforming" business lines but not realizing that the underperforming business lines are covering some of the fixed costs of the "good" business lines. Once those costs are re-allocated to the "good" lines, they are not underperforming and need to be jetsoned off. Eventually there is nothing left in the organization that can cover the fixed costs and it goes under.
It's one of the things they teach you to watch out for in business school. Why it keeps happening over and over and over again, I have no idea.
Re:Brilliant! (Score:5, Interesting)
Because nobody thinks this stuff through, teaching it at business school or not.
Everybody tries to appease the "stock market" because it's "increasing shareholder value" (Don't you mean shareseller value, guys? Let's be honest here- since there's no real way to obtain value through dividends, etc. you have to sell it off to some bagholder at some point or short it to them...)
Upvote the above for coining a good term (Score:5, Insightful)
"Shareseller value": noun; the real reason people buy shares, which is to sell them at a profit; opposite of "shareholder value", which is the diminishing value of shares held by someone who has been duped into believing that investing in the stock market will make his or her retirement pecunious.
Re: (Score:3)
Successful use of dividend stocks will provide more long term gains to a stock short of being a very lucky day trader. This is the great myth the part time shareholder has brought to the system, that dividend stocks are worthless, they actually provide higher returns on average than every other non-dividend stock.
The problem isn't dividend stocks, the problem is a management system that provides higher returns to CEO's than for long term growth. The problem was created by GE and there long term 20% growth t
Re:Brilliant! (Score:5, Insightful)
Because business school also trains them to minimize costs and maximize quarterly profits. And their managers and stockholders reward them for that as well. Which inevitably leads to that behavior and a bunch of other idiotic ones. Because as you demonstrate with the bit about fixed costs, a lot of these numbers are fictions. Sometimes convenient fictions, but always fictions.
This is in contrast to the Lean approach where one minimizes waste and maximizes value delivered to the end user. In Lean thinking, staff aren't a cost to be shed ASAP, they're an asset, one you invest in.
Re: (Score:2)
Well, to be fair to IBM this time, I don't think retail store shared a lot of fixed costs with other parts of IBM. Now PC division and the impact on their servers was pretty significant from what I hear.
Also, at the same time, IBM is also buying companies like crazy too.
Management == ruling class. (Score:3)
Re:Brilliant! (Score:5, Insightful)
"You right, but if you do not provide raises, make working condition miserably by giving more work then is humanly possible, give no hope of promotions to most and never back fill."
Then you can raise a hue and cry about how inefficient and lazy US employees are, that they deserved being let go and replaced with bright, shiny overseas workers who will work cheaper, longer and so much more profitably. Never mind the ramifications. Less money circulating in US economy, less taxes being paid by US employees. Good move, management! All the while, continue to drive for shifting tax burden to those who are losing jobs ( no, not as IBM management, but as individuals supporting current right wing ideology )
Re: (Score:3, Informative)
I provide developer support on an SDK... I can tell you one thing - every horror story anyone ever told about complete lack of quality, skill, ability, and in many cases: common sense with regard to outsourced Chinese and Indian development is more likely true than not.
Outsourced to Russia? well, they may steal your IP and put it in someone else's product (even your competitors if they're hired by them) but at least there's a culture of curiosity and figuring things out. I've worked with some pretty smart C
Not so much about the offshoring... (Score:2)
In my experience, it's more about the outsourcing strategy of work goes to the lowest bidder. The good teams in China/India are priced out of the market of most companies looking to outsource. The same is true in the US, but US executives I don't think have a real intuitive grasp on the cost of living implications and thus fail to recognize a too-cheap chinese bidder as too good to be true. When faced with a competitive US outsourcing bidder, they may sense something wrong and is more likely to figure ou
Re:Brilliant! (Score:4, Informative)
"Racism much? I bet your sweeping generalizations of other cultures takes you very far in life."
It's called inductive reasoning.
http://en.wikipedia.org/wiki/Inductive_reasoning [wikipedia.org]
"Hume highlighted the fact that our every day habits of mind depend on drawing uncertain conclusions from our relatively limited experiences..."
There's nothing wrong with making generalizations based on the data set to which you've been exposed. I think it goes without saying that the comment is based on personal experience as opposed to a comprehensive study.
The evolutionary nature of this type of thought process is obvious. People that didn't figure out that certain plants and animals will kill you after they'd made a few observations were weeded out of the gene pool.
Why corporate tax at all? (Score:3)
If that is the case, why doesn't the US just cut corporate tax to 0%....for companies IN the US doing work with US workers?
That would attract businesses by the droves I'd think...so, no loopholes, no corporate taxes...
Wouldn't that mean more companies wanting to come to the US to do their work? The US would make up the mon
Re:Why corporate tax at all? (Score:4, Informative)
That would attract businesses by the droves I'd think...so, no loopholes, no corporate taxes
Except they're doing just fine with 0% US taxes by keeping the money all offshore with their employees [yale.edu]. Why should they bring that money back into the country to hire more expensive employees that are going to demand enough pay to buy a house for their family instead of living 20 to a dirt hut or sleeping in a company cot in the barracks?
Re:Why corporate tax at all? (Score:4)
But this situation doesn't last for long. Indian workers now live in modern houses in the suburbs with a car and work in modern buildings that from the inside look just like American buildings. So now there are problems in outsourcing to India because the competition for the good people have gone up and now rates there are half of the US instead of 1/10. And when they are half, the overhead to work overseas no longer pays for itself. So, they can try to find cheap workers elsewhere, but they don't speak English like Indians do. Ultimately, it's getting cheaper to just hire Americans again, because there is too much competition in India to make it profitable.
Re: (Score:2, Informative)
Re: (Score:2)
Sounds like a great idea, but that will just increase profit, not decrease prices or increase employment. The rules of supply and demand broke down in the 70s with the invention of artificial demand (aka commercials) and artificial supply limit (aka cartels and monopolies). The shelf-price of an item has little, if anything, to do with the cost to make the item, and everything to do with shareholder greed.
Imagine you are a shareholder, the corporate tax just vanished and corporate profits are up, do you:
(a)
Re:Why corporate tax at all? (Score:5, Insightful)
I don't understand corporate tax to begin with....I mean, it isn't something that a 'company' pays really, it just eventually falls through to the consumer of that company's product....
That's simply an oversimplification. Exactly who ends up paying what percentage of a tax varies a lot depending on the specific circumstances, and is an area of serious economic research. Wikipedia's article on tax incidence [wikipedia.org] provides a pretty good overview, but the short answer is that extra taxes on corporations typically gets split between consumers (in the form of higher prices), employees (in the form of lower wages), suppliers (in the form of cuts), and shareholders (in the form of lower earnings).
This is important to point out, because the false belief that corporations just pass along all taxes benefits the minority of Americans who own significant amounts of stock. In 2007, 1% of Americans owned 43% of all financial assets, the next wealthiest 19% of Americans owned 50%, leaving just 7% for everybody else (source [ucsc.edu]). So if you're a stockholder, you want taxes on corporations low, which means you'd really like to convince most people that taxes on corporations are just taxes on themselves so that they'll oppose taxes on corporations. In other words, it boils down to rich people saying "We want more money".
Re: (Score:2)
Is it too hard/difficult to add apostrophes to your post? ;)
Re: (Score:2)
Re: (Score:3)
Hopefully most of their lawyers would be in that 78%.
IBM lawyers were /. heroes during the SCO legal shenanigans. What a fickle bunch we are.
Re:Brilliant! (Score:4, Interesting)
If I recall, IBM doesn't wield patents like ..say .. Oracle. They don't run around suing people for the heck of it. What typically happens is IBM gets sued by random small corp for some minor patent that IBM may be infringing on, IBM then offers a cross licensing agreement that is favorable to IBM, but does not overly punish said random company. The random company then has a choice, cross license, drop the suit, or lastly go to court, at which time IBM lawyers drop the patent portfolio on the table and says "we're suing you for infringing upon $X number of our patents, and we are suing for compensation"
And guess how well that goes for the Random Company? Which is why you don't see IBM in courts much. They just want licensing agreements and do business. Granted, not all of IBM lawyers are dealing with patents, which is what the lawyers were doing regarding SCO.
Re: (Score:2)
This is the thing that concerns me about their decline. IBM has been one of the most prolific software patent filers in the world. If they go down, think fall of the Soviet Union, but with no inclination on the part of anyone who can do anything about it to stop them from selling all the nukes to the highest bidder.
Re:Brilliant! (Score:4, Insightful)
What decline?
http://goo.gl/yRwK5 [goo.gl]
Compared to their competitors, IBM seems to be doing okay if the markets are to be believed.
What decline? (Score:2)
Q4 2011 was IBM's most profitable in it's 100 year history.
You're just making stuff up.
Re: (Score:2)
Re:What decline? (Score:5, Informative)
The article is about slashing 78% of US employees at IBM. That's not a sign of a healthy company.
They'll be replaced immediately by employees from India and China.
When I was in China I applied to IBM for data warehouse consulting and got to a third round interview. The hiring manager told me the salary, which was about $1,000USD/month (a pretty good rate in China) but they would send me to the US to work. I pointed out that was below the US minimum wage and she said never mind that because they would send me on a 'Z' visa which is good for up to two years with no salary restrictions. When I then objected I couldn't be sent to the US on any kind of visa as a US citizen, she immediately hung up. I tried to call and email to follow up but couldn't get any response.
So, don't worry about IBM's profitability after they get rid of those pesky US workers and their outrageous salary demands. The going rate on an IBM data warehouse consulting is measured by $hundreds/hour and it's almost all markup straight to the company.
Write to your congresscritter and demand something be done about Z visas.
Re: (Score:2)
The article is a guess based on an individual's opinions of a statement made by IBM.
Sure, he may have done well in the past at making predictions, and he may be right in this case.
However, shedding four-fifths of their US employees within three years isn't *necessarily* IBM's idea on how to accomplish it.
Re:What decline? (Score:5, Informative)
Sorry, it was the L visa: inter-company transfer.
Re: (Score:2)
If I recall, IBM doesn't wield patents like ..say .. Oracle
Let's look at a company that Oracle bought recently and their origins...
When Sun was starting up, they got a visit from the Nazgul[1] with seven IBM patents. They met the Sun team (only a handful of people then), who showed that there was enough prior art to invalidate some of the patents and that they weren't infringing on any of the others. Then Nazgul agreed that, no, indeed, Sun was not infringing on these seven patents and said 'would you like us to come back with some you are infringing?' Sun sign
Re: (Score:2)
No, it'll be those who actually build and create that'll get shown the door.
Re: (Score:2)
In what court? India, China?
Odd timing... (Score:4, Interesting)
The IBM building across the road from the lab I work at here in Winnipeg just had a "For Lease" sign go up yesterday.
Re: (Score:3)
"IBM" disappeared off a building near here recently.
Series of Articles (Score:2, Informative)
This is just one of a series of articles he's releasing this week. Two of them are currently available on his site.
Absurd (Score:5, Informative)
Comment removed (Score:5, Funny)
if you don't get the joke, don't mod. (Score:5, Funny)
Re: (Score:2)
Re: (Score:2)
if by "managers" you mean "executives", then you may have a point. However, I'm pretty sure that low-level managers are affected by these layoffs.
Re:Absurd (Score:4, Interesting)
I submitted the original article on Slashdot 5 years ago [slashdot.org].
You're right, it didn't happen. But maybe by getting the word out, maybe Bob changed IBM's course of action. Maybe instead of laying off most of their domestic workers over the last 7 months of the year, they switched and went with a more gradual move to prevent losing most of their businesses in the U.S. which would have been a very risky undertaking.
If what Bob says is true, then we have a choice. We can let the trend continue, or we can let our state and federal representatives know that we'd rather have work done by small local businesses instead of the megacorps. Of course, we need to let everybody know that we are selecting between two options, a cheap one and a more expensive one. Demand that the more expensive group deliver premium service, and I don't think anybody will complain. Deliver lower quality or have a worse record on up time or missing deadlines than the cheaper alternative, and know that the taxpayers will demand that the next contract will be bid out to the cheapest bidder which will be IBM or another big outsider.
Re:Absurd (Score:5, Insightful)
Re:Absurd (Score:5, Informative)
please start with the Cognos people (Score:5, Informative)
cognos is the worst piece of crap software i've had the pleasure of working with. it's a huge pain in the a$$ to install, you have to make dozens of changes that isn't in the documentation and only available by calling support. even then they tell you to google stuff because the IBM support site is a mess to navigate
and after you buy the software you find out features are missing because you didn't buy the right version. there are like 20 different versions of Cognos with different features
SQL Server may not be 100% as good, but at least it's pretty easy to set it up and get going for the 90% of the features you will use
Re:please start with the Cognos people (Score:5, Informative)
Re: (Score:3)
The thing I hate the most is that their support staff only know certain aspects of the suite. If you have an issue with Cognos Planning, but you are accidently routed to someone in the Cognos Business Intelligence support group, they have to reroute your case and you'll be waiting at least several hours before they call you back. Heaven forbid you have an issue with integration between the two suites.
I've never heard of Cognos but I used to work for IBM acquisition Tivoli and I can tell you why that happened there. First, the invidual products (I worked on TME10 Inventory) are massively complicated and horribly underdocumented. I had to go to meetings with the developers to understand the product well enough to support it. So you really need product-specific teams. Second, switching from one team to another once you've been there for a while is a political process, so odds are you're not going to get a
Re: (Score:3)
Buddy, I'm from Ottawa. I live just a few minutes from the main Cognos building, where many of my old college buddies used to work. In the opposite direction used to be RIM's big bad campus. Another few km north stood Nortel. And I can't remember the name but there was this giant faceless consulting firm a few years ago, J.P. somethign... J.M.B. I dunno, started with J. Anyway, they're all gone.
If I've learned anything from this city, it's that we can't sustain any big tech company. We have lots of
Cognos history (Score:2)
Cognos came via an acquisition from what i understand and is not an IBM original. But i agree it is a convoluted mess. Thankfully i still get to use Crystal reports. ( and have since they were independent )
Re: (Score:2)
No, no, the Continuus/CM/Synergy people. If there ever was over-expensive crap software that needs to die right away, it is certainly this. It is written against all good rules of CS, it is extremely slow and costs possibly as much in lost time as the licence costs. Please, please, please kill it of now.
Re: (Score:3)
i realize they bought these companies but i have SQL databases i manage that began life in SQL 7 or 2000 and seem to work just fine in 2005 and on 2012 test servers. cognos upgrades are a nightmare
i had to install it on a x64 machine and have to use 3 different tools because some work on x64, others are only x86
Re: (Score:2)
Why stop here, they could also fire the Clearcase and Clearquest teams while they are at it.
They did, and created RTC. What a piece of crap that is.
Probably Wrong (Score:5, Insightful)
What kind of predictions does he get right? Software will crash and Google will be the new Microsoft and Microsoft will be the new IBM.
http://www.cringely.com/tag/2011-predictions/
Re: (Score:2, Interesting)
Also posting anonymously because I've been a grunt on the inside. It doesn't matter if the timing of his numbers is right, the bigger picture is definitely there.
IBM employees in the Americas need to unionize. Yesterday.
http://endicottalliance.org/
Re:Probably Wrong (Score:4, Interesting)
They needed to back in 1999-ish when Gerstner began fucking with the pension.
Alliance@IBM was really useful though circa 2003. Gave us plenty of warning that a Resource Action was coming to Software Group in RTP.
Re: (Score:2)
Also posting anonymously because I've been a grunt on the inside. It doesn't matter if the timing of his numbers is right, the bigger picture is definitely there.
IBM employees in the Americas need to unionize. Yesterday.
http://endicottalliance.org/
Meet the new boss, same as the old boss.
Now more than ever... (Score:3)
Comment removed (Score:3)
Re: (Score:3)
So IBM is selling the rest of the company to China (Score:5, Insightful)
That's what this means. When they got out of the PC business they just sold it to china. And now they're apparently doing the same thing with their research division.
Companies don't survive that. The logo might survive. But it will be hollowed out mask.
Oh well. Ironic that this was once the company said to be an unbeatable monopoly.
Re: (Score:3)
their point of sales machines constitute 78 percent of US staff? Really?
Re: (Score:2)
Maybe it's just their way of saying there is no more future left in their industry, they don't believe the can compete and are slowly shutting down? So what? businesses do this all of the time. This is just a way of soaking up as much money on the way out as opposed to eventual bankruptcy.
Or maybe it's there way of saying there is little future left in the US. Maybe Brazil / India / China / etc. are the growth centers they're banking on. Maybe then it makes lots of sense to 'outsource' those functions.
To the people who will be paying for them.
There are companies that look beyond the next quarter. IBM tends to be one of them.
This joke has been done before (Score:5, Funny)
Several years ago somebody put out a joke press release that went something like:
Dear Employees,
We have calculated that reducing the workforce by 10% would result in a savings of $100 Million. Taking those calculations further, we have determined that eliminating 100% of the workforce would result in a savings of $1 Billion. Because we are committed to driving maximum shareholder value, we are announcing that we will be eliminating 110% of the workforce. The additional cuts will be achieved by laying off employees of other companies.
When questioned if laying off 100% of the workforce would cause the company to no longer exist, the CEO replied "Nobody has ever tried this before, so let's not be too hasty to jump to conclusions".
Responsibility is expensive (Score:2, Interesting)
In the USA, many of the obligations to employers come from government-enforced responsible behavior. We want equal treatment of women, minorities and LGBT people; employee rights and regulation; health and safety standards; environmental pollution limitation; a complete tax system; counseling for employees who need it and so on.
Other countries don't (yet) have these, so their costs are most lower.
If the consumers start being willing to pay extra money for products designed and built according to our standar
Re: (Score:3, Informative)
Actually, the US lags behind other Western democracies in the things you enumerate as being overly costly.
So those that the system has entrusted with overseeing our business and industry sends our jobs to second and third world nations - and they reap huge bonuses for doing so, and thereby, destroying our economy and nation.
Re: (Score:2)
Corporation only care about profits and will do ANYTHING to the workforce to control labor costs.
Blaming the government won't solve the problem. Holding corporations account
Re: (Score:2)
Hold them accountable by buying hundreds of millions of their product? Or do you just want to impose morals on companies through law? Because that works.
Re: (Score:2)
I think you're talking past each other. Nobody is suggesting that we shouldn't have anti-pollution or health and safety laws just because they can be expensive. (Although let's not ignore that certain laws can cause suboptimal results that we should strive to avoid, e.g. if people are coerced into hiring unqualified applicants on the basis of race.)
I think you're both saying the same thing: That consumers should buy American-made products even if they cost more. The problem is that that doesn't really work:
Re: (Score:2)
If they're only saving a 20% advantage over their US BoM, why even DO it in the first place? Quality's not the same dealing with China. I'd rather be dealing with Taiwan on manufacturing (and even then, that's a relative concept... I'd rather be dealing with a US manufacturing interest...they're less likely to screw around with designs, rip them off, etc. just to make more on their margins...). So you can "save" a couple of million on costs? Odds on, they're not even saving that much on production- it
Re: (Score:2, Informative)
Other countries don't (yet) have these, so their cost is lower.
They don't? Obviously you don't work in Europe. In the socialist leaning countries, these rules do not get much press because they are no big deal. In the US, laws to ensure equal protection are treated by some (like yourself) as the cause to end civilization. How dare women demand to be paid the same money as men for doing the same job? Don't they know exploitation is a God-given right in this country?
Re: (Score:2)
"How dare women demand to be paid the same money as men for doing the same job"
Women do get paid as much as men; once actual hours worked, time off for family, medical time off, vacation, and types of jobs (men work more dangerous, higher paying jobs) are factored in. In large blue cities (like New York) women are now making more then men.
Re: (Score:2)
Re: (Score:2)
How about just simply winnowing out the bullsh*t regs that you're referring to as the source of expenses in business (which would be a good portion of the expenses, really...). Most of them are byzantine and largely impossible to abide by in the first place.
Once you rid yourself of the rubbish, it suddenly gets cheaper (Offshoring only LOOKS cheaper on paper- it inevitably makes it more expensive farming stuff out to India, Taiwan, or China...) and your quality will be the same or improve.
Federal Role? (Score:2)
I'm fairly Right Wing and just uttering those words makes me feel queasy.
But I have to say that when it comes to U.S. chartered companies outsourcing the majority of their employees and work over seas, I have a problem.
Despite Globalization, I believe there is still something to be said for "dancing with the one who brung ya". At the very least, these companies have benefited from the U.S Legal and industrial infrastructure. I'm not saying that the Feds made IBM possible, but it was a symbiotic relationship
Re: (Score:3)
Well, that rather goes to the core of the problem. And I'd note it's far more than the government contracts: it is the flood of WWII and Vietnam vets who took degrees from the GI bill; it's the education system that this nation built up; it's the industry and work ethic of the people that built the economy that made IBM possible.
But these days, our system is set up to reward those who maximize profit. Outsourcing, layoffs and liquidations are rewarded with bonuses to those who do those thing. Destroying
Re: (Score:2)
At the very least, these companies have benefited from the U.S Legal and industrial infrastructure. ... The U.S. (Feds, state and private) is a BIG customer and As such, I think a reasonable person can say that IBM and other large U.S. companies "owe" something to the U.S. and its workers.
I think it would be better to just add them to your list of companies to boycott until they come around. Getting the Feds involved isn't going to fix anything, and will likely just make it hurt more.
... assuming there's any truth to the story in the first place. Someone mentioned this story is from 2007.
Re: (Score:3)
The problem is how to you persuade them to honor that debt without completely stomping all over the existing Business environment?
You don't. You can't. Because the existing Business environment is a million MBAs saying "I got mine, screw you!", and fighting tooth and nail the slightest hint that maybe the success of the companies that hired them had something to do with ginormous government outlays in public education, highways, civil courts, property rights enforcement, publicly-funded research, contracts, grants, etc. etc.
I do not question the great Cringely. (Score:2)
Well, well... (Score:2)
This certainly puts the recruitment message from an IBM recruiter I got on LinkedIn last week in a new light.
Just part of an existing IBM trend (Score:4, Informative)
When I started with IBM in 1999 they had ~220k US employees. At the beginning of 2009 they had ~115K. That year they had two rounds of lay offs that included ~5K per round. IBM stopped publishing the number of US employees after that for some reason.
- I got hit in that second round
Re: (Score:2, Informative)
I started in 99 with IBM as well. I got hit in this last round in the 1st quarter of this year. To be honest, I was glad to go, and feel sorry for the folks still there. When I joined, it was an AWESOME company to work for. Not anymore, it just sucked daily. No responsibility at the management level, and lots of finger pointing. It was hell.
And increase Indian headcount by 500% (Score:2)
They forgot the rest of the headline.
So What's New? (Score:2)
(And no, before you start calling bullshit, that is not controversial at all. It *IS* a matter of historical record. There are even documents that prove Watson himself knew what was going on.)
Why should we expect a company that started out with a "profit above all else" attitude to have changed?
Works for awhile (Score:3)
If the goal is to keep stockholders happy over a short period of time, huge layoffs work well. Unfortunately, it's an easy way to make a company irrelevant. It's usually accomplished by reorganizing sales and marketing mostly for appearance, while cutting deeply into engineering and service. This produces an agile, high performing sales force, lower operating costs, and higher profits over the short term. And then next year the company realizes they have nothing new in the pipeline, and restarting product development is prohibitively costly. Customers who observe the downward spiral start to bail, as well as customers who are tired of calling service and getting routed to a clerk in Kharsingi. And in a few years, the company exists as an answer on Jeopardy. One of the cheap ones.
IBM is getting out of software development. (Score:5, Interesting)
IBM's strength is its sales channels. It can command high prices for it's software because it is a trusted brand, and it's very good at strong-arming customers into purchasing expensive complicated solutions once they get their foot in the door.
IBM's new software business model is as follows....
1) Find holes in their "portfolio" for providing end-to-end solutions for customers.
2) Purchase existing companies where that software is already implemented (e.g. Rational, ILOG, Green Hat, Cognos, Buildforge, Telelogic, etc...)
3) Sell said software at much higher prices than the original company could have ever gotten away with.
4) Reduce headcount by eliminating developers from purchased company, replacing them with offshore developers whose only purpose is to "maintain" the newly acquired software. Also, eliminate less-profitable niche products and lay off those developers except for the cream of the crop.
5) Reap huge profits.
6) Repeat.
Check out the list of companies they've acquired...
http://en.wikipedia.org/wiki/List_of_mergers_and_acquisitions_by_IBM#Acquisitions_since_1999 [wikipedia.org]
So don't think that the executives at IBM are idiots. They're not. They've found a way to squeeze tons of profits from existing software companies. They have no reason to care about employee morale. They don't need developers. They've got too many as it is from all of these acquired companies. Bad morale means employees will leave on their own, meaning they don't have to pay severance.
Also, IBM typically purchases companies for a handful of their product line. That leaves lots of smaller software products that IBM simply has no use for (not a large enough market, duplication of product lines, etc...). Often, "rebalancing" means chopping these products out of existence. IBM has literally THOUSANDS of these small niche products that it wants to eliminate.
So for developers, it sucks, because the IBM executives have no need for you anymore. There's no reason for IBM to produce its own software anymore. Why risk starting development on a complex product when you can just purchase the finished product? You're nothing more than a "resource" that they have too much of and which needs to be reduced through "resource actions".
But for executives and shareholders, it's a wonderful arrangement. Don't be fooled....IBM can be profitable doing this for a very long time. Please keep in mind that IBM reducing US headcount from 130k to 90k is misleading. That number does not include the huge number of employees that they've absorbed through acquisitions. They've laid off many more than 40k US employees, and they have no reason to stop now.
Re: (Score:3)
Two results of this:
1. It destroys free enterprise and competition.
2. It creates a system where those who create can only do so in limited venues, and for a limited time before they're thrown on the rubbish heap. And those who create get an even smaller share of the rewards (no more tenure because you built a ten million dollar product).
Really, really sad state of affairs is this post industrial feudalism
Probably not (Score:3)
Services, while they don't entirely depend on having people in the US, depend at least in part in having many people in the US or some equally expensive English speaking place.
Re: (Score:2)
Re: (Score:2)
You get crap from them because the parent companies pay crap. They will build to any spec you want as long as you pay for it. It's just most companies choose to build to a lower spec - because they can.
In the fashion industry, for example, Chinese manufacturers are now considered "high-end". Go to boutique stores, and you will now only find Chinese-made clothing for the $100+ market. Anything below has been out-outsourced to Vietnam, Cambodia, and Indonesia.
Re:Curious (Score:5, Interesting)
No... Wrong answer from start to finish. You can still have issues with tight specs, paying well, etc.
Prime example: Bindeez/AquaDots [wikipedia.org]. In this instance the toy manufacturer had explicitly specified 1,5-pentanediol as the plasticizer, a relatively safe, non-toxic, chemical. The Shenzen based offshore manufacturer substituted 1,4-butanediol, a much cheaper plasticizer compound that has similar characteristics, but is **NOT** safe or non-toxic. 1,4-butanediol converts to GHB in the gut through the enzymatic processes there. GHB is a dangerous date-rape drug. Why did they subsitute it? Because 1,4-butanediol is VASTLY cheaper than 1,5-pentanediol and they didn't connect the dots (no pun intended) that they were making a bad choice- and they did it to increase their margins, didn't think anyone would notice the change, and quite simply DID NOT CARE.
What you're saying may be the case, but this was one of those "high-end" bunches that DID that. Sorry, not buying your line for a moment because it still happens often and there's little concern by the people over there running the businesses over the sorts of impacts of decisions like this. Not even with companies like Foxconn.
Re: (Score:2)
Invariable? How about just "inconsistent"?
Re: (Score:3)
What? Most companies doing this outsourcing don't realize it's not an apples-to-apples tradeoff. One of the core issues is that IT education in India is different than in the U.S. In India they spend much of their time on the technical aspects of a broad range of languages and platforms, but that training lacks the depth and the thought training that universities in the U.S. use in their curriculums. That shifts the burden of design and management from the average U.S. CS degreed developer who can do it
Re:Correct, but the reductions are through attriti (Score:5, Funny)
his was a baldface lie. [worldwidewords.org]
Re: (Score:2, Informative)
Boomers? No. Financial theorists of the late 1970's/early 1980's? Yes. That's roughly when the concept of "maximizing shareholder value" started to get taught in business school. (I was there, I know. Big name east coast B school - it was on all my professors' lips.)
It was BS then, it's BS now - it misses the basic fact that a corporation has three constituencies, not one - customers, employees, and yes, shareholders. Take care of the first two, and the third will do just fine, thank you very much. P
Re: (Score:2)
Boomers? No. Financial theorists of the late 1970's/early 1980's? Yes. That's roughly when the concept of "maximizing shareholder value" started to get taught in business school. (I was there, I know. Big name east coast B school - it was on all my professors' lips.)
It was BS then, it's BS now - it misses the basic fact that a corporation has three constituencies, not one - customers, employees, and yes, shareholders. Take care of the first two, and the third will do just fine, thank you very much. Pay your employees what they are worth, give your customers what they pay for, focus on delivery and not empty marketing, and the value of your business (and hence your shareholders' worth) will grow accordingly.
It takes thinking past this quarter's results. Under pressure from investors and analysts, that's hard to do - so hard, I think just about the single worst thing a successful company can do is go public. (Looking at you, Facebook...)
Yeah, financial theorists are part of it, but it still takes a gullible, apathetic public to allow the actual polcies to be implemented. Truth is, the policies are doing exactly what they were intended to do; bankrupt the government by putting it so deeply in debt, there would be no way to provide any social services, corporate oversight, regulation, etc. That's not even to mention the *huge* corporate propaganda campaigns teaching people to hate their government and hate anything resembling social welfar
Re:Article is dated in 2007^W 2012 (Score:2)
What article is dated 2007? The article in the first link provided in the aummary is from this month. It references a previous writing from 2007.
Re: (Score:2)
When all that remains in the US of our technical industry is management, it will be only a matter of months before we lose that as well.