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Highlights—July 19, 2014

  • The Register:

    Big Blue Apple: IBM to sell iPads, iPhones to enterprises. iOS/2 gear loaded with apps for big biz ... uh oh BlackBerry. By Jack Clark. Excerpts: IBM and Apple have forged a pact to sell software to enterprises: Apple will handle support and IBM will actually sell the iPads and iPhones, which will be loaded with Big Blue's ported apps. Oh yes. ...

    IBM, for instance, will "sell iPhones and iPads" loaded with any of 100 industry-specific software products codeveloped by IBM and Apple, while Apple will handle phone support for the products. Inevitability, on-site support will be handled by IBM.

    As part of this, IBM will port about 150 of its applications to iOS. This software should be available starting this autumn, the New York-headquartered giant added.

  • I, Cringely:

    IBM and Apple just not that big a deal. By Bob Cringely. Excerpts: There are three aspects to this deal — hardware, apps, and cloud services. For Apple the deal presents primarily a new distribution channel for iPhones and iPads. Apple can always use new channels, especially if they hold inventory and support customers who aren’t price-sensitive. Apple’s primary goal is to simply get more devices inside Big Business and this is a good way to do that.

    The apps will all be developed by IBM but will still sell through the App Store and will have to meet Apple’s quality standards. I guarantee you meeting those standards will be a problem for IBM, but that’s not Apple’s problem. In fact as far as I can tell Apple has few if any resources deployed on the app side so for them it’s almost pure profit. Who can argue with that?

    Cloud services for iOS are more complex and problematic. I’m doing a whole column shortly on IBM’s cloud strategy so I won’t go too deeply into it here, but let me point out a couple things. Apple has more data center space than does IBM, so it’s not like Cupertino needs IBM’s cloud capabilities. Apple is also a customer of Amazon Web Services, the largest cloud vendor of all. These facts suggest to me that this aspect of the deal is where fantasy hits reality. IBM wants iOS cloud services, not Apple. Big Blue dreams of iOS cloud dominance and they expect it will be fairly easy to accomplish, too. After all, they have a contract!

    But to Apple the cloud services are just a necessary expense associated with getting device distribution to IBM’s customers. If no cloud services actually appear or if they do appear but are useless, Apple won’t care. Same, frankly, for the IBM apps.

    Selected reader comments follow:

    • Prior to leaving last year, I had downloaded a half dozen IBM apps, all of which were centered around area’s of expertise in the area in which I worked. There was not a single one that was used more than twice. Enduring the whacked up loadset on one’s PC and experiencing the wonders of ISSI are nothing short of a nightmare. Since leaving there, going from a fully loaded i7 to an i5 ThinkPad with half the ram has responsiveness and performance about double what I saw on the IBM loadset. Another topic is the business analytic’s software that was run against the RA list last year. The results to say the least were laughable and embarrassing. This agreement won’t change any of that. 100% agree with Bob, this aint’ no big deal.
    • Can’t help feeling that this is my staid boring uncle getting on the dance floor to bop with the kids. But then maybe it is showing a willingness to change. Maybe this is part of the transformation we’ve been promised for the last 5 years (which has always so far resulted in more process, more control, less initiative).

      I can’t see IBM as a phone salesman, I can see us producing massive, slow, buggy apps with poor user interfaces; and if I’m wrong there then why do we do it with our current software offerings? IBM has managed to hide its inability to write good code behind corporate deals that deliver poor products and then charge to fix them. If we go direct to the public then we won’t have that last silk handkerchief to cover our embarrassment

    • Ex-IBMer and Apple fanboy here… While I was at IBM I had the “opportunity” to run numerous apps on the iPhone that were being written for internal consumption. Garbage, every one of them. It’s like the developers read “iOS development: Novice to Expert in 24 hours” and used pre-canned examples to make the UI’s. But maybe internal apps aren’t subject to the same scrutiny as customer facing apps?

      May I present to you Lotus Traveler. This app-bomination sounds good on the surface: you can now check your Lotus Notes email on your phone! But wait, before you install you have to set the home screen passcode to a minimum 8 character password that includes a mix of upper and lowercase letters and numbers (on the Android version you also had to install some worthless anti-virus software). That’s right, they couldn’t just lock the app with a passcode, they had to lock the whole damn phone. So now when you want to quickly pull your phone out of your pocket to check the weather, you are now stymied by a complex passcode…might as well not even bother.

      Oh, and what about the app? Garbage. The interface looked nice (by IBM standards) but it was slow and buggy. Needless to say I deleted it within a week. Every piece of software I used at IBM was horrible. Notes, Sametime, Sametime Meetings (for webcons), their Intranet search. Given that well crafted apps require an extra level of skill to run on the rather minimal memory and processor speed I can’t wait to see what IBM does here. There are probably a bunch of fresh Indian programmers already porting their bloated Eclipse applications over to it (My Help anyone?).

    • Hope its good for Apple in the corporate space, I use my iPad as a note taker and would love to be able to access the corporate LAN instead of having to drag my dodgy laptop (Windows/XP FFS) in case I need to reference an email or work group. Talking of email, I use Notes and it seems to actively prevent me from doing my job. I believe it's cursed or haunted because a human couldn’t have written such an evil piece of software. I first used Notes 15-20 years ago and can honestly say it hasn’t (in my view) improved much since then. So in summary, deploy a decent mobile email/workspace client and kill Lotus Notes.
  • Seeking Alpha:

    Growth Rates Steadily Declining At IBM. Excerpts: The concern for International Business Machines Corp. is its growth rate. The business model is solid, everyone loves the services segment, and IBM has made a name for itself in generating recurring revenue streams, but the last earnings release was very concerning and growth rates have come into question.

    In fact, our analysis shows us that on a quarterly basis, the trailing 12 month growth rate for IBM actually turned negative last quarter, but the trailing 12-month yearly growth rate is still positive. Ultimately, it is that yearly growth rate that matters most, the quarterly growth rates often carry with them noise, but in our observations we always consider trailing 12-month numbers.

  • The Register:

    Days since IBM last reported revenue growth: About 810. Big Blue inches past analyst expectations in Q2 2014, but at what cost? By Jack Clark. Excerpts: IBM revenues have overall declined, year on year, for the ninth quarter in a row as the company struggles to adjust to a cruel world increasingly led by lower-cost competitors. ...

    Global Technology Services revenues were $9.4bn, down 1 per cent year on year, and Global Business Services revenues were $4.5bn, down two per cent. Services signups were down 33 per cent for the first half of the year, compared to a year ago, which is worrying given the importance of that division to IBM's revenues. Software was up 1 per cent to $6.5bn. ...

    However, IBM said in its earning release that "strategic growth initiatives" were growing quickly, with cloud revenue up over 50 per cent in the year-to-date, and its various "as-a-service" technologies now logging an annual run rate of $2.8bn. Mobile revenue was up "more than 100 per cent year-to-date", it said without disclosing any actual revenue figures.

    Along with the new initiatives, IBM has also been on a firing spree as it seeks to increase profitability for Wall Street. IBM started a "slaughter" of its Indian and European workforce in February of this year.

    Selected reader comments follow:

    • Competing on price when quality *was* your defining attribute, and when other providers are still capable of undercutting the price, has lead to a barely skilled technical outsourcing resource pool that is chronically short staffed. Customers who thought they were spending a little more to buy top shelf service are disappointed, and customers only focused on the bottom line were never potential IBM clients anyway. Constant focus on short-term quarterly results has undermined long term customer commitment.

      Sorry this is anonymous but we're not allowed to say such things.

    • Not all shareholders...Demand their pound of flesh from IBM. The bigger issue from my perspective as a shareholder is that the board's incentive scheme for the directors is focussed solely on increasing the dividend to shareholders. This means that the directors don't care about whether the company grows in financial terms only whether they can generate sufficient free cash to pay the shareholders and earn themselves huge buckets of dollars.

      I think that this focus on returns to shareholders is driven by the directors and has nothing to do with the demands of Wall St. IBM's directors are in this business for one purpose alone, to make as much money as they personally can at the expense of the staff and the company.

  • Seeking Alpha:

    The Fed's Financial Repression At Work: How Big Blue Was Turned Into A Wall Street Slush Fund. By David Stockman. Excerpts: IBM is a poster child for the ill-effects of the Fed’s financial repression. In effect, the Fed’s zero interest rate policies are telling big companies to issue truckloads of debt and use the proceeds to buyback shares hand-over-fist. That way fast money speculators on Wall Street are appeased by the resulting share price lift, and top executives collect bigger winnings on their stock options.

    In its recently completed quarter, IBM again repurchased nearly $4 billion of stock—which amounted to about 93% of its net income for Q2. Likewise, IBM also reported lower sales versus prior year for the ninth quarter in a row.

    This juxtaposition should not be surprising. For more than a decade now, IBM has been eating its seed corn. Since the beginning of fiscal 2004, Big Blue has posted $131 billion in cumulative net income, but saw fit to reinvest fully $124 billion or 95% of its earnings in its own balance sheet, which is to say, in buying back its own stock. ...

    So how has it managed to keep the game going? In a word, by means of financial engineering. Its tax rate has been cut in half—from 30% to barely 15%. It has spent nearly $30 billion on acquisitions, repeatedly creating accounting reserves (i.e. cookie jars) at the get-go in order to insure that the dozens of small companies bought with cheap debt were highly accretive to EPS.

    But at the end of the day, it was done by sacrificing its balance sheet. In 2004 IBM had $13 billion of net debt. Today the figure stands at just under $37 billion. And why not. IBM’s average weighted cost of debt last year was just shy of 1%. Thank you, monetary politburo!

    Needless to say, under a honest free market in the financial sector, America’s once greatest technology company would not be functioning as a slush fund for Wall Street gamblers.

  • Seeking Alpha:

    IBM Extends Slump, Cheers Analysts. By Jeffrey P. Snider. Excerpts: The speed at which standards for judgment and analysis have eroded has been slow enough over the past few years as to be nearly imperceptible. There is, of course, a tremendous difference between a company analyst and a macro observer, but that does not necessarily and directly lead to special divergences. In fact, most of the time one flows into the other, as most top-down analysis ties the two together.

    In the case of IBM, optimism continues to be the operative mode despite its obvious struggles. The cheering of the shrinking firm is harmonized at the macro level by the persistence of an "any day now" capex resurgence based on cash. That is particularly ironic given IBM's preferred mode of cash deployment which has nothing to do with capex and productive investment.

    Given the changes taking place in the technological landscape, cloud adoption and SaaS among others, you might make the intuitive leap that such cash might be better used to keep IBM ahead of the curve (hardware, once the core operation, now a drag), or at least catch up in areas where it is clearly behind, rather than almost exclusively on share price. You can't "prove" a counterfactual, but you also can't help but wonder if IBM might have been better served with internal assets deployed with an eye more toward long-term expansion.

  • Wall Street Journal:

    Cost-Cutting Aids IBM's Profit, but Revenue Remains Soft. Computing Giant Continues to Struggle With Shifts in Market. By Don Clark and Tess Stynes. Excerpts: International Business Machines Corp. failed for a ninth straight quarter to boost revenue, but the technology giant's bottom line benefited from recent cost-cutting. ...

    Toni Sacconaghi, an analyst at Bernstein Research, noted during a conference call that new signings of services deals were off substantially and that IBM has had nine straight quarters with revenue declines in services.

    He also said IBM fell short of its executives' optimistic projections this spring about software revenue, which grew just 1%, while its operating-system revenue declined 13%. "They were very emphatic that software would improve this quarter," Mr. Sacconaghi said.

  • Financial Times:

    IBM: buying spree. Big Blue’s enthusiasm for share buybacks has seen earnings rise faster than revenues. Excerpts: They call IBM Big Blue. But actually, fewer than 1bn bits of it float around the stock market these days. IBM’s share count dropped to 998m in the second quarter. Four and a half years ago, there were just shy of 1.25bn shares. Since then IBM has repurchased $68bn of its stock. And it is not the only one; US share buybacks reached a record in the first quarter of the year.

    IBM has been particularly enthusiastic – that $68bn is $18bn more than the buybacks which, in 2010, it promised during the next half-decade. “Roadmap 2015” may be better known for another IBM promise, to increase earnings per share to at least $20 by that year (it reached $17 in 2013). But IBM also promised $100bn – or roughly what the Apollo space programme cost – of free cash flow during the five years 2010-2015. Looking back, between 2000 and 2013, IBM produced $165bn in free cash, and spent $140bn on share buybacks and dividends. ...

    That is all very nice, but companies such as IBM cannot keep buying back shares and cutting costs forever. Overall in the US economy, the share of output taken by labour remains at a generational low. However, that means it may have bottomed, so bargaining power may return. Shareholders might prefer earnings growth to come from higher revenues (which could in turn require that cash is ploughed into the company, not paid out) rather than lower costs and fewer shares. But financial engineering, once begun, may be hard to let go of.

  • VTDigger (Montpelier, Vermont):

    Analyst, Economist Weigh Potential of IBM Sale to GlobalFoundries. If IBM were to sell its computer chip-making unit to California-based GlobalFoundries — patents and all, as the company is widely rumored to be considering — would the new owner of Vermont’s largest manufacturing plant even want to keep it?

    Probably not, according to Len Jelinek, a semiconductor manufacturing industry analyst for the global information firm IHS.

    National press reports indicate GlobalFoundries is primarily interested in IBM’s intellectual property — not the physical plant in Essex Junction, Vt. — and Jelinek holds the same view. The firms already collaborate and share some patents.

    Jelinek, however, is not convinced the potential sale is a done deal — or even that selling the chip-making unit would be in IBM’s best interest.

    “I think there’s a lot of people running around with doom and gloom with regards to IBM’s chip manufacturing,” Jelinek said. “I don’t entirely subscribe to that.”

  • BusinessInsider:

    Druckenmiller: IBM Is The 'Poster Child' For What's Wrong With Corporate Behavior Today. By Myles Udland. Excerpts: IBM is the "poster child" for the "balance sheet" recovery that has seen companies engage in financial engineering rater than invest in their business, said Stanley Druckenmiller at CNBC's Institutional Investor Delivering Alpha Conference.

    Druckenmiller highlighted what he called a "shocking" statistic about IBM: their sales are what they were six years ago. ...

    Over that time, Druckenmiller said, IBM has tripled their debt load to buy back stock instead of invest in their business.

    Buying back stock is a way that companies can improve their earnings per share, as it reduces the number of shares outstanding, thereby reducing the denominator when computing earnings per share — a company's net income divided by its shares outstanding.

  • Bloomberg Businessweek:

    IBM Sales Sink Again, for the Ninth-Straight Quarter. By Nick Summers. Excerpts: IBM posted yet another quarter of falling revenue, its ninth in a row, as the 103-year-old technology company continues to struggle to adapt to the cloud era of computing. Shares fell 1.5 percent in after-market trading.

    The company still managed to beat Wall Street’s expectations on its preferred financial measurement of adjusted earnings per share, as it usually does. Big Blue has sworn to hit an adjusted $20 per share annually by the end of next year, a plan officially known as Roadmap 2015 and which employees call Roadkill 2015. With falling sales, the imperative to keep delivering higher earnings has meant imposing deep cost cuts, racking up debt to pay for buybacks, selling business lines, cutting jobs, and devising tax-rate cleverness—all at a time when IBM should probably be throwing everything it has at the cloud.

    That conundrum, the subject of a recent Bloomberg Businessweek cover story, has boxed in Chief Executive Ginni Rometty ever since she was tapped to take over the company in 2011. Rometty talks all the time about how urgently IBM needs to transform for the era of cloud, yet her hulking, 431,000-employee organization has been slow to respond. To meet their computing needs, corporate customers are spending less on IBM mainframes and servers and more on computing delivered cheaply and flexibly over the Internet by the likes of Amazon. Falling demand for hardware is threatening IBM’s software business and the lucrative consulting work that often knits everything together.

  • Poughkeepsie Journal:

    IBM local job numbers fall to new low. By Craig Wolf. Excerpts:IBM's total Dutchess County headcount fell to its lowest in decades in early 2014. A report made by the company and obtained by the Poughkeepsie Journal revealed a count of 6,897 at the end of February, down 10 percent from one year earlier. That was 771 jobs gone off the IBM payroll.

    Downsizings are nothing new for IBM, which employed more than 31,000 people in the mid-Hudson in the mid-1980s. The biggest cuts occurred in the 1990s, hitting 9,800 in 1996. This was followed by a modest rally to the range of 10,000 to 12,000 and a decade of relative stability.

  • New York Times obituary:

    Francis G. "Buck" Rodgers. Excerpts: Buck graduated Alliance High School in 1944, was class officer his four years, football quarterback, basketball player. He enlisted in the Air Force and declined an offer to play baseball with the St. Louis Browns. Buck graduated Miami University and joined IBM as a sales trainee in Cleveland, Ohio. Buck was in the forefront of the evolution of the computer as Computer Representative, Branch Manager, Finance Industry Director, Western Region Division leader, and President of the Data Processing Division. For 10 years, he was IBM's Vice President of Marketing, responsible for worldwide marketing activities,. He was a well-regarded speaker at 100% Clubs and Golden Circles with his signature dapper attire and effortless, inspirational style. Buck retired from IBM in 1984. ...

    Rodgers' wrote two books, The IBM Way, and Getting The Best Out Of Yourself and Others. He is in The Ten Greatest Salespersons, The Perfect Sales Presentation, and In Search of Excellence.

    Selected comments from LinkedIn's "IBM Official Alumni Group: The Greater IBM Connection" group follow:

    • Buck Rogers was a giant among IBM sales people. The master salesman, speaker and motivator. I didn't know him well, but saw him at various speaking venues and found him to be a great human being.
    • I had the privilege for Buck to be my Executive Sponsor when as a young salesman I was responsible for an International Account. We were losing to competition and his presence opened the door to the CEO of the customer. But what I most remember was his trust and leadership in letting me deliver the pitch. I tried to keep his role model as a leader with me throughout my career. He was an enabler of success. BTW, we won.
    • I joined in 1984 - when you heard storied of Buck - it was like hearing of a legend. It contributed in the spirit of what made IBM a special place.
    • I knew of Buck Rogers in 1978 while working for IBM while in college and later as a rookie sales rep in the General Systems Division, he was legend. It was a great experience to have him come and speak to our sales training class in Atlanta. He was a truly inspiring person who made you proud to be an IBMer.
    • Buck Rogers was the first President of IBM that spoke at a Hundred Percent club not standing at lecture stand, he walked the stage and spoke without notes, brought the house down, sales love him, they felt like he was one of them.
    • I met Buck at a recognition event in Miami in the early 60s. We spent a few minutes chatting before entering the main tent - I went to a seat in the crowd and Buck went straight to the podium to make his presentation. He spent his time with me talking about my customers and my impressions of IBM. No need to check his notes or focus on his presentation. He was a very polished and greatly loved leader.
    • IBM could use some more sales leadership like Buck Rodgers today. The company has great financial and accounting expertise, but desperately needs motivational sales leadership. The sellers want and need somebody they can respect and follow to drive sales growth.
    • I know when someone first told me his name, "Buck Rodgers" I thought they were pulling my leg. I never worked for him but am a great admirer of his thoughts, ideas and writings. Below are a few quotes from his "The IBM Way." I would highly recommend his book.

      "The people in the field have to be a combination of analyst, consultant, applications specialist, technologist and salesperson - - and they have to be good in every area. Too many companies think of their reps only as salespeople, with their primary and perhaps only function being to persuade a prospect to buy their product."

      "I never cared where a person was in the management hierarchy, but went to whoever I felt could provide me with the most timely and accurate response. I respected the individual's intellect and capability."

      "We will do whatever is necessary to keep our people challenged and motivated; to assure that we have the money to invest in people, research and development; and to give our customers the best possible value. We will change everything except our beliefs."

      "One of the real values of this sort of contention system is that while people may disagree, they don't have to compromise themselves in order to settle an issue. At IBM, it is called the 'right of nonconcurrence.' Once a decision is made, there's no animosity. It's not a game of win or lose; everybody is playing on the same team. Both line and staff are held accountable for the results."

      "Not only do I give advice when asked, I also never hesitate to seek it. Yet for some people I know, asking for advice is more difficult than asking for money. . . .I also found that often the best advice comes from someone who brings to the table a totally different point of view."

    • I heard Buck speak at a 100% Club many years ago. He was the epitome of the polished, professional IBM salesperson. He spoke from the heart with no charts, notes or teleprompters, about the great opportunities for all the salespeople in that room. His words instilled a great pride in being part of IBM.

      Later that evening, my manager took me to meet Buck at his home. As a young salesperson, I was a bit intimidated to meet the legend. Buck welcomed us into his living room where we shared a beer and for an hour he asked me about my business, customers, thoughts about IBM. He was sincere, polite, no pretense and made me feel like I had met a new friend. I will never forget that evening. Buck Rodgers was a tremendous salesman, leader, motivator, and all around great guy. They don't make them like him anymore. He will be missed.

    • As a young IBM rep, Buck made a call on my client. He was already retired, but when he stepped off the airplane, he was ready to go. He didn't have to do this, but I had called his phone number because I knew he was coming to town. And guess what, he answered his own phone. My client was thrilled to meet Buck and it remains one of my fondest IBM memories. Buck truly epitomized the Basic Beliefs.
    • As a freshly minted Data Processing Customer Engineer in 1962 my wife and I were seated with Buck Rogers at a family dinner in Los Angeles. There were eight couples from different areas. Buck knew every persons name, wifes name, and children's names. He had genuine personal interest in everyone. I am sure he was briefed, but he remembered flawlessly. It was an exciting time to be an IBMer. I met Tom Watson Jr. at that same dinner.
  • LinkedIn's IBMer group:

    What can IBM do to retain its employees, especially the recent hires? Selected comments follow:
    • Analyst Programmer at IBM UK Limited: IBM's strategy of reducing staff pay by not increasing it in line with cost of living is hurting many staff. I've worked for IBM for more than 10 years, with 2 minuscule pay rises - £10's/year its an insult. I will be leaving as soon as economic factors recover.
    • IT specialist at IBM 9/2007 to 4/2012. I felt I was a slave. I was a college hire and I work hard to fit in. Need to say there was no training and management was not nice. I was in the same band all my 5 years. I got a new job elsewhere now. I have no complaint to IBMers. They did what they had to do and I was very proud to be an employee but no more. Now I need to move on and make more money for the hours I put in the job.
    • Preferred Network and Wireless contractor at Nielsen IT Consulting Inc. One way is to quit dumping experienced people every time you don't look like you are going to not quite make a quarter. If IBM has not noticed skilled labour is getting harder and will get harder to get. So your practices of the past of dumping people that have experience and loyalty is going to bite back and real soon. If you don't show loyalty to your employees they won't have loyalty to the company either. It works both ways.
    • Certified IT Leader with 18+ Years Experience | Enterprise Architecture | SDLC | ITIL | Agile | Infrastructure & DevOps. A sense of accomplishment or creativity only goes so far. Most people (except the nerds and geeks) cannot sustain those positive thoughts without any other type of motivation to keep them happy over longer periods of time...it's simply not sustainable. And I agree, with a previous post, you cannot pay your mortgage with a happy thought. It always helps to also get paid fairly, feel appreciated, receive training, get recognition, and receive rewards (when appropriate).

      And IBM really doesn't do much of any of those things anymore...unless it costs the company $0 (i.e. an Intranet e-Card). And simply giving out free stuff is not a strong motivator (and it doesn't pay the mortgage either)... and usually it does more harm than good... insult to injury. IBM must continue to invest in its employees... and investments aren't free.

    • Senior Analytics Performance Tester at SAS Institute. It's quite simple. Bright people leave when they see a consistent pattern of those at the very top hoarding all of the wealth while the other 99% are getting starved out of bonuses, pay raises, awards, forced to buy their own computer monitors, etc. IBM has created an environment of famine starving out whole divisions on purpose while reporting record profits and record revenue. This question being asked assumes IBM actually wants to change the situation which is simply not true. This is management 101 simple stuff that they are absolutely doing on purpose with full knowledge of the fall out. The sad part is seeing the negative effects on the families of the common workers. It's modern feudalism at its finest.
    • Former Resource Deployment Manager at IBM Global Services. Until IBM is concerned about keeping all of its employees technically vital and feeling like there's "respect for the individual" (does anyone remember that phrase?), this question will continue to be discussed ad nauseam. The group that I was in (in IBM US), like many others, never seemed to have any education dollars (or they were extremely hard to get) for people who wanted to continue to increase their technical viability for the group, thus being a more valuable employee. I believe it's a very common thought among IBMers that unless you're on the fast track to super stardom, eventually you're pay increases will begin to grow smaller and smaller until you're "at the top of your band" for salary.

      Salary, while important to everyone, really isn't at the top of many IBMers concerns. It's feeling that they're being valued and treated with respect. Instead, there's a continual lay off process that only leads to more concerns ("am I next") and more work for everyone involved (whether it's a short or long term impact is dictated by how talented an off shore resource may be). In my humble opinion, the changes that have happened across all of IBM over the past 10-15 years will never be "unchanged" in regards to how people are ultimately treated monetarily. I am comfortable in thinking that retention will be "the topic of the day" 25 years from now.

    • SSR at IBM. Obviously employees are finding that the market reference point is off. PBC concept misses the SMART assessment criteria and IBM hasn't decided if they want to be the best or the cheapest. It's not a pay for performance model, so much as a lottery or popularity contest. Seems glaringly obvious to many of us. Time to re-engineer performance management and compensation if employee retention is an issue.
    • 2nd Line, AP Enterprise Systems Technical Support at IBM. To start, we need employee-friendly HR leadership.
    • Senior SQA Engineer at Netezza. The whole "do more with less" attitude has to change. Reduced staffing and accelerated project schedules isn't going to work, it is just going to force people out the door. And fix w3. That is the most frustrating thing. The answer to everything is "find it on w3". It takes you hours to find what you need and when you do, the link is broken.
    • President at John Pitcher Consulting. I believe IBM has been on a course that causes business operations to be exactly as they wish it to be. First, they view unforced attrition as a positive. That is, people leaving is a good thing for the business, as long as it is within their desired range. The company will take no action as long as the rate is within that range.

      Second, an old adage is people join companies and leave managers. But there's a set of assumptions that go along with that. One of them is your direct manager can actually help your career goals and your work environment. The company has steadily gutted the authority of first line managers to the point they are little more than administrators and mouthpieces. They cannot stand up for employees identified for resource action. In many cases, they find out only hours before they have to notify employees. They cannot support their direct reports' career goals beyond their own network of contacts, informally, or beyond what their manager will allow, within the formal career paths.

      A team member leaving of their own accord only draws attention if it has an immediate, significant impact on operations, sales, or execution committed to under contract. Otherwise, it's virtually unnoticeable beyond a second-line view.

  • LinkedIn's IBMer group:

    I would like to know why new hires leave IBM so soon, I have heard stats of up to 50%? Selected comments follow:
    • IT Specialist at TD Bank. The culture has changed drastically at IBM; employees in North America and Europe especially, know that IBM has no commitment to employee growth and is only committed to profit. New hires know this and have no loyalty whatsoever to IBM. They will gain skills and IBM and move on. Just as IBM will use employees then RA them without a second thought.
    • Program Director ERP at Emmi Group. It's a pity to say but the way IBM treats his employee...now wonder so many are leaving. There is no or very little loyalty IBM has towards its employees...so why should employees show more loyalty?
    • Consulting in Strategy, IT Innovation-Digital Economy, Strategic Execution. The trend at IBM is unfortunately a global trend on the Services Market to preserve margins. A short term strategy, that doesn't acknowledge we sell human value. Unfortunately if everyone is heading that way, a lot of board of Directors will justify this policy by the fact that competition does the same.

      Management only focuses on cost cutting, as a result the reason why a young hire would value IBM and stay even if proposed a better offer has disappeared: employee development programs, awards, worldwide TLE that enabled the top talent and executive talent to network and develop their knowledge. I would add to that the focus on managers, that can help the youngster to grow their skills and understand big complex IBM (remember the certification to ensure one is promoted manager if he has the skills,"LDC").

      Of course all of that has a cost, but it is 10 times the value. Hope Ginni Rometty will be able to reactivate the basic principles to create innovation and value with the new generation.

    • Senior Software Development Manager at IBM. The recent departures I am aware of:
      • Top performer, but left the company for a more stable environment. He is a younger employee with a family and IBM does not offer the stability it once did for someone who has a family to raise and is looking for long term employment.
      • Better opportunity. Seems strange that we have nearly half a million jobs and yet there are people leaving due to opportunity. It has always been and continues to be much too hard to move from job to job within IBM. This is especially true across divisional boundaries.
      • Pay and benefits. http://money.cnn.com/magazines/fortune/best-companies/ IBM isn't even in the top 100 companies. We should not be surprised by the fact that some of our best and brightest are finding better opportunities.
    • Education Services and Tech: Coordinator - Noncredit Computer Education (NCCE) Information Technology. It was very difficult to grow and move within IBM. They had 100's of positions internally that anyone would qualify, but due to politics you are stuck. The word on street for most new people is, "Get in and Get out." Instead of a company that builds on maintaining employee intellectual property, it will soon be a transition funnel for other companies. Unfortunately, the only people who matter are the people on top.
    • Consultant at IBM Belgium bvba-sprl. I've some remarks. I can tell you, as well as low, mid and high performers are leaving IBM. So, there is much much more going on in the world of young people. It's all about values, values in your life and more and more social values, company cultures and differences in generations. It's very complex.
    • Senior Analytics Performance Tester at SAS Institute. It is obvious to the younger workers that there is no career path at IBM. Anyone really talented can find much faster and better upward mobility by leaving IBM and going just about anywhere else. There are a lot of other companies with interesting technical challenges that pay better and are much more stable than the guaranteed RA that IBMers face. I would hope our young people are smart enough to see that much since IBM makes it so painfully clear every year.
    • Open Group Master IT Architect at IBM. Three main reasons:
      • Loyalty is a two way street. New hires see all the RAs and therefore are always looking for another job. Since there is no job security it only makes sense to take a job that offers just a little more compensation.
      • With all the work-at-home and traveling employees, IBM now stands for I'm By Myself. Therefore employees do not form close bonds with their peers so it is easy to just leave at the first opportunity.
      • It is hard to work in an "I'm By Myself environment." Most people want camaraderie that is severely lacking in today's IBM.
    • Senior Account Executive (Seeking my next new challenge). Having recently left after some 30 years, the culture within IBM has dramatically changed, sadly with little or no employee respect. Management, senior management and above are purely concerned on profit in return for pay bonuses to themselves. Look at Palmisano's salary rise and bonuses when he was there instigating this; hitherto this comes from the top. Corporate greed is now on automatic!
    • EMEA e-Invoicing Subject Matter Expert at GXS. I was acquired rather than hired, but I'm sure the experience is similar for a new hire. IBM is a culture shock for anyone. The scale and complexity is intimidating, and frankly depersonalising.

      My personal experience - which was within software group - included a number of frustration areas. Internal politics meant individual divisions were either competing directly with each other or worse forced to sell "by committee" with literally dozens of sales reps all turning up to the same customer meeting to lay out their stall.

      Individually there was definitely a facelessness to the organisation, and a feeling that my individual efforts were not appreciated.

      The hugely bureaucratic environment also meant that bringing about meaningful change was nigh-on-impossible. In today's fast-paced business environment a certain amount of agility is essential, and IBM has the agility of a battleship.

      If you look at Big Blue's history, it nearly sunk itself before it was rescued by Louis Gerstner in the early 90's because it had grown beyond it's ability to sustain itself, and my feeling is it has grown again to an unmanageable scale. Time will tell but reading these views here does not fill me with confidence.

      I survived at IBM for two years before finding a much better offer.

    • HR Service Delivery Professional at IBM. Because IBM doesn't care about the employee...and they feel under appreciated
  • Associated Press:

    Backlash Stirs in US Against Foreign Worker Visas. By Laura Wides-Munoz and Paul Wiseman. Excerpts: Kelly Parker was thrilled when she landed her dream job in 2012 providing tech support for Harley-Davidson's Tomahawk, Wisconsin, plants. The divorced mother of three hoped it was the beginning of a new career with the motorcycle company.

    The dream didn't last long. Parker claims she was laid off one year later after she trained her replacement, a newly arrived worker from India. Now she has joined a federal lawsuit alleging the global staffing firm that ran Harley-Davidson's tech support discriminated against American workers — in part by replacing them with temporary workers from South Asia.

    The firm, India-based Infosys Ltd., denies wrongdoing and contends, as many companies do, that it has faced a shortage of talent and specialized skill sets in the U.S. Like other firms, Infosys wants Congress to allow even more of these temporary workers.

    But amid calls for expanding the nation's so-called H-1B visa program, there is growing pushback from Americans who argue the program has been hijacked by staffing companies that import cheaper, lower-level workers to replace more expensive U.S. employees — or keep them from getting hired in the first place. ...

    The H-1B program allows employers to temporarily hire workers in specialty occupations. The government issues up to 85,000 H-1B visas to businesses every year, and recipients can stay up to six years. Although no one tracks exactly how many H-1B holders are in the U.S., experts estimate there are at least 600,000 at any one time. Skilled guest workers can also come in on other types of visas.

    An immigration bill passed in the U.S. Senate last year would have increased the number of annually available H-1B visas to 180,000 while raising fees and increasing oversight, although language was removed that would have required all companies to consider qualified U.S. workers before foreign workers are hired. ...

    The top users of H-1B visas aren't even tech companies like Google and Facebook. Eight of the 10 biggest H1-B users last year were outsourcing firms that hire out thousands of mostly lower- and mid-level tech workers to corporate clients, according to an analysis of federal data by Ron Hira, an associate professor of public policy at Rochester Institute of Technology. The top 10 firms accounted for about a third of the H-1Bs allotted last year. ...

    Last month, three tech advocacy groups launched a labor boycott against Infosys, IBM and the global staffing and consulting company ManpowerGroup, citing a "pattern of excluding U.S. workers from job openings on U.S soil." ...

    Infosys spokesman Paul de Lara responded that the firm encourages "diversity recruitment," while spokesman Doug Shelton said IBM considers all qualified candidates "without regard to citizenship and immigration status." Manpower issued a statement saying it "adopts the highest ethical standards and complies with all applicable laws and regulations when hiring individuals." ...

    Last year, IBM paid $44,000 to the U.S. Justice Department to settle allegations its job postings expressed a preference for foreign workers. And a September trial is set against executives at the staffing company Dibon Solutions, accused of illegally bringing in foreign workers on H-1B visas without having jobs for them — a practice known as "benching." ...

    Norm Matloff, a computer science professor at the University of California, Davis, agreed that age plays into it — not because older workers are less skilled but because they typically require higher pay. Temporary workers also tend to be cheaper because they don't require long-term health care for dependents and aren't around long enough to get significant raises, he said. ...

    Because they can be deported if they lose their jobs, these employees are often loath to complain about working conditions. And even half the standard systems analyst salary in the U.S. is above what an H-1B holder would earn back home.

  • New York Times:

    This Road Work Made Possible by Underfunding Pensions. By Josh Barro. Excerpts: The Federal Highway Trust Fund is expected to run out of money in August. So, naturally, Congress is debating a temporary fix that involves letting corporations underfund their pension systems.

    Of course, we could replenish the fund by raising the federal gasoline tax, which is its primary source of financing. That’s what Senator Bob Corker, Republican of Tennessee, and Senator Christopher S. Murphy, Democrat of Connecticut, want to do. But increasing gas taxes is unpopular, so Congress hasn’t done so since 1993, which means that the tax on gas has actually fallen 39 percent over the last 21 years after you adjust for inflation. Instead, Congress has used a series of gimmicks and shifts to keep the fund solvent as highway construction costs have risen.

    The latest proposal, which passed the Republican-controlled House Ways and Means Committee on Thursday, works like this: If you change corporate pension funding rules to let companies set aside less money today to pay for future benefits, they will report higher taxable profits. And if they have higher taxable profits, they will pay more in taxes over the 10-year budget window that Congress uses to write laws. Those added taxes can be diverted to the Federal Highway Trust Fund.

    Unfortunately, this gimmick will also result in corporations paying less in taxes in later years, when they have to make up for the pension payments they’re missing now. But if it happens more than 10 years in the future, it doesn’t count in Congress’s method for calculating budget balance. “Fiscal responsibility,” as popularly defined in Washington, ignores anything that happens after 2024.

  • Alliance for Retired Americans Friday Alert. This week's topics include:
    • Capitol Hill Event Puts Focus on Older Unemployed Workers
    • Alliance Joins Boycott of Staples over Efforts to Privatize Postal Operations
    • Social Security Administration Will Still Issue Verification Letters at Field Offices
    • Alliance Urges Members to Make Voices Heard on Field Office Closings
    • Affordable Care Act Success Fails to Bring Political Reward
    • Fiesta Meets With AFSCME Retiree Council
New on the Alliance@IBM Site

Job Cut Reports

  • Comment 07/13/14:

    More offshoring; a friend of mine just got laid off from UnitedHealth. Management and subordinates of a customer call center trained their replacements in Malaysia. They gave them two weeks to train them before being let go. My friend was told Malaysian English sounds more American than other foreign countries' English, which is why they opened a huge call center there.

    I don't understand how they help American customers in Malaysia. How can your personal information be accessed by foreigners? How is that even lawful? I would think at a minimum that would violate HIPPA requirements. -Anonymous-

  • Comment 07/14/14:

    Global Foundries is advertising in IBM locations for personnel for Malta. My guess is that they have decided that it's cheaper and easier just to cherry pick people than to buy the whole of MD, especially as they've indicated they want people more than physical assets. -Dave-
  • Comment 07/15/14:

    Managers meeting in EFK today, Cadigan announced GF deal is off... -anonymous-
  • Comment 07/20/14:

    3+ executives left to GF from Fishkill last week. Not exactly a morale boost. One of those same execs gave people a "there's nothing to worry about" meeting only 2 months ago. #rolemodels -bongo-

IBM Retiree Issues Comments

If you hire good people and treat them well, they will try to do a good job. They will stimulate one another by their vigor and example. They will set a fast pace for themselves. Then if they are well led and occasionally inspired, if they understand what the company is trying to do and know they will share in its sucess, they will contribute in a major way. The customer will get the superior service he is looking for. The result is profit to customers, employees, and to stcckholders. —Thomas J. Watson, Jr., from A Business and Its Beliefs: The Ideas That Helped Build IBM.

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