IBM Layoffs Include Wide Ranging U.S. Job Cuts

Internal documents show Big Blue is eliminating more than a thousand positions in its Global Business Services unit alone.

It's not a good day to be an IT specialist in IBM's Global Business Services unit.

More than 600 workers carrying that title were given walking papers Thursday as part of a sweeping reorganization under which Big Blue is eliminating as many as 5,000 positions in the United States, according to sources and internal IBM documents.

"In an effort to rebalance skills, eliminate redundancies, and deliver greater economic efficiencies, IBM Global Business Services is announcing a resource action affecting U.S. employees in Application Services," says an IBM document dated March 26 that has been obtained by InformationWeek.

The cuts in GBS Application Services alone number 1,674, according to the documents, which show that the redundancies are wide ranging and affect IBM locations across the country.

In addition to the more than 600 IT specialists impacted by the restructuring, the layoffs cover a broad swath of other positions -- from 53 partners in the Security and Privacy Services group to one 58-year-old "teleservices professional." Other jobs axed include those of dozens of IT architects, sales specialists, managing consultants, systems analysts, and financial analysts. Not included in what IBM, which cut more than 4,000 jobs earlier this year, euphemistically calls a "resource action" are the unit's 10 VPs.

IBM isn't the only tech company paring its workforce amid the economic downturn. Agilent Technologies said Thursday that it plans to lay off 2,700 staffers. Microsoft earlier this year announced 5,000 layoffs.

An IBM employee group, [email protected], claims many of the jobs are being eliminated so that the company can move the positions to low-cost locations like India, where programmers earn less than half the annual salaries of their U.S. counterparts. IBM officials have not returned calls seeking comment.

IBM has been reducing its U.S. headcount for the past several years while expanding its presence in emerging markets. IBM employed 115,000 workers in the United States in 2008, down from 127,000 in 2006. The company now employs more than 70,000 workers in India.

Beyond the Subcontinent, Big Blue is building its footprint in Brazil, China, Eastern Europe, and other countries and regions where salaries are low compared to U.S. standards and where growth prospects exceed those of the sluggish North American market.

IBM believes its willingness to place jobs in foreign markets gives it an edge when it comes to bidding for domestic work in those areas. For instance, the company in late 2007 snagged a $600 million contract to help Vodafone roll out wireless services in India.

The upshot: IBM has been riding out the global recession better than most of its peers and it continues to pay a healthy dividend to investors.

In the most recent fourth quarter, IBM's sales fell 6.4% year over year to $27 billion. But earnings per share rose 17% to $3.28 and net income jumped 12% to $4.43 billion. The earnings beat Wall Street expectations.

Cash-strapped corporate IT departments also stand to benefit if IBM's offshoring drive helps to keep a lid on prices for tech services.

IBM also may be looking to trim its sails in advance of some significant corporate activity. The Wall Street Journal last week reported that the company is in talks to acquire Sun Microsystems for about $6.5 billion. IBM also may be interested in acquiring on-the-block Indian outsourcer Satyam, which is seeking to emerge from an accounting scandal that has seen its chairman and several executives jailed.

But despite some sound business reasons for offshoring, the job cuts come at a particularly sensitive time. IBM has been one of the most active tech vendors in terms of efforts to secure work funded by President Obama's multibillion-dollar stimulus package -- which largely aims to improve the nation's infrastructure while creating thousands of new jobs.

"Companies will look to hire more software developers, IT consultants, and managers who possess both the technology and business skills necessary to support these investments" as a result of the American Recovery and Reinvestment Act of 2009, IBM said as recently as two weeks ago.

Some IBM workers believe any jobs created by the stimulus package and other government programs should remain in the United States.

"Do research on the state and federal tax breaks IBM has gotten or is getting. Many if not most of these tax breaks were deals where IBM promised to bring in jobs," one [email protected] member wrote in a post on the group's online forum.

According to IBM's documents, laid-off workers will receive one week of pay for each six months worked, to a maximum of 26 weeks. They also will be eligible for some health care and retraining benefits. The catch: To receive severance benefits, the workers must promise not to sue IBM or solicit current IBM employees or customers if they end up at a competitor.

Axed employees should not hold out hopes of getting recalled. According to one IBM document, "This layoff is permanent."

Each year, InformationWeek honors the nation's 500 most innovative users of business technology. Companies with $250 million or more in revenue are invited to apply for the 2009 InformationWeek 500 before May 1.

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