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"There would be no buildings costs, no pensions and no healthcare costs, making huge savings," he said. Outsourcing experts said employers from both the private and public sector were increasingly using the model as they looked to squeeze people costs post-recession.
When asked how many permanent people IBM could potentially employ in 2017, Gringo said: "100,000 people. I think crowd sourcing is really important, where you would have a core set of employees but the vast majority are sub-contracted out." He stressed the firm was only considering the move, and was not about to cut 299,000 jobs, as staff would be re-hired as contractors. ....
Ian Crinkle, associate director at the Work Foundation, said: "It's really important that companies don't just look at cost savings when considering [the IBM] model. They have got to be prepared to invest a lot of management time into handling relationships and networks and the long-term applications of it all." However, an IBM spokesman denied the firm was about to shrink its permanent workforce by three quarters in seven years. ...
Conrad, a retired IBMer himself, didn’t accept IBM’s denials at face value. “IBMers have seen this happening already but at a smaller scale: employees terminated only to be offered jobs back inside IBM as contractors at reduced pay,” he told Local Tech Wire and WRAL.com. “IBM workers worldwide need to join together and say to IBM that this is unacceptable. “Although an IBM spokesperson claims what an executive said is only speculation, just the fact that they are studying it shows what little regard the company has for its employees,” he added. “One also has to wonder whose comment is right, the IBM spokesperson or the IBM executive. Just who is running the company?”
The company’s denials did not satisfy Alliance@IBM, the union seeking to represent IBM workers. “It appears that with IBM's so called ‘crowdsourcing employment,’ job security within IBM continues to be endangered,” said union spokesperson Lee Conrad. “It is clear IBM wants employees that are nothing more than temporary ‘hired hands’ with no benefits and no protection.”
The company’s denials did not satisfy Alliance@IBM, the union seeking to represent IBM workers. “It appears that with IBM's so called ‘crowdsourcing employment,’ job security within IBM continues to be endangered,” said union spokesperson Lee Conrad. “It is clear IBM wants employees that are nothing more than temporary ‘hired hands’ with no benefits and no protection.” ...
The story drew specific denials from Doug Shelton, head of corporate media relations for IBM. Asked about the story, Shelton took time out from IBM’s annual shareholders’ meeting in Milwaukee to call Local Tech Wire and WRAL.com. “You asked if these comments were authorized by IBM, and the answer is no,” Shelton said. “Frankly, the comments are ludicrous. “To say that we are even thinking about cutting three quarters of our work force is silly,” Shelton continued. “We need people all around the world to do the work.” Shelton pointed out that Ringo is not involved with IBM’s human resources group. “He is not part of our HR function,” Shelton said, noting that he is a consultant.
The vast majority of that money went to share buybacks, which Big Blue uses to prop up EPS and also to award stock to employees as a form of compensation. But one could argue that shareholders would have been a lot happier if IBM just gave them the billions instead of just a little taste. But Wall Street likes a stock that is rocketing, not one that is steady, because you can get richer quicker.
And so, IBM executives, who are compensated largely in stock, are compelled by the system to do everything they can to pump the stock. That includes continual layoffs under the radar of regulators and the press; offshoring manufacturing, software development, and support operations; and shelling out billions each quarter to eat those shows to show EPS growth. Hence the additional $8bn in share buybacks that IBM's board also authorized today.
The other reason was to try to push IBM shares up, as the financial results for the first quarter, announced last week, did not. While IBM's earnings were up 13 per cent, to $2.6bn, in the quarter, revenues grew a more tepid 5 per cent, to $22.9bn, and both were against easy compares, given the economic meltdown was raging at the time last year. During his chat with Wall Street analysts discussing the quarter, Mark Loughridge, IBM's chief financial officer, did not paint a particularly rosy or bland picture of the IT market, and therefore, IBM's share price has been languishing in the $130 zone. The shares actually lost a half point on the announcement - go figure.
With the introduction last year of the new industrial relations regime, the ASU had challenged IBM’s anti-union stance with Fair Work Australia, launching an action against the company last November. According to McManus FWA’s decision was delivered last week, and obliges IBM to negotiate with the ASU. It is understood this is the first time that the computer company will have been dragged to the negotiating table by a union anywhere in the world.
A 401(k) plan has an intrinsic problem. It tries to reach a specific goal — the amount you need to retire — by investing in stocks, bonds and money market funds, none of which offer specific returns. In essence, a 401(k) takes the task of a highly paid pension manager and gives it to each worker. Investors learned about the job's difficulties the hard way from 2007 to 2009, when the Standard & Poor's 500 index fell 57%, the biggest bear market since the Depression. About 60% of all mutual fund assets in retirement plans is invested in U.S. and international stocks, according to the Investment Company Institute, the funds' trade group. ...
Consider a worker who made $75,000 a year and invested 7% of his income a year in a 401(k) plan. He invested in a conservative mix of 40% bonds and 60% stocks. If he had started with $250,000 in September 2007 and retired in February 2009, his retirement nest egg would have dropped to $168,000. If he held on until March 31 of this year, he'd have $248,000. Of course, $13,000 of that increase would have come from his own contributions.
Cons This is the most quintessentially bureaucratic, hierarchical, corporation I have ever worked for (and I've worked in quite a few places). In the technology sector this model feels sorely outdated and full of needless hoops to jump through. Title and rank mean everything here, and execs who have played the game their entire careers have an interest in keeping things this way. There are absolutely no limits or boundaries that are respected. You have to assert your own work/life balance and stick to your guns, otherwise you will work yourself to death. 5am meetings, standing weekly meetings that go until midnight, you name it. Most of my time is spent on internal meetings instead of doing "real work." On an average day I spend 5-8 hours on conference calls, and the flow of emails, deadlines, and fire drills never stops, and must be managed on top of the endless meeting cycles.
IBM is cheap when it comes to spending money on its employees. Sharing hotel rooms, unrealistic meal allowances, limited reimbursements for essentials are all part of the game. Business class is out of the question even on long haul trips. You're expected to stay in cheap hotels and take the red-eye home and keep smiling.
The notion of having a job for life is gone. The company treats lifers like barnacles at this point, scraping them off the side of the ship during the annual purge. That said, nearly everyone I meet has been around for 10-15 years or more with no plans to leave. This seems like an unsustainable situation - expecting die-hard commitment while regularly pulling the rug out from under employees. Feels like the company is following instead of leading in most segments.
That kind of behavior can't satisfy Wall Street's insatiable demands for growth, and the pressure to deliver revenue growth (and not just profits) seems to be on. I joined the company through an acquisition and am relatively new, and I can't for the life of me figure out why people stay. I don't see any light at the end of the tunnel or pot of gold after all the hard work people regularly put in, even for those who have crossed the magical boundary into the executive ranks.
Advice to Senior Management: Make some bets, commit to them, and encourage managers and employees to find new areas of growth. IBM's internal hurdles and processes are ridiculously elaborate and hinder time to market and innovation. The Smarter Planet campaign has resonated with the market. To make it a reality is going to take guts, and people are going to have to stick their necks out to make it happen. I see very little incentive for execs or managers to risk their precious careers at IBM given the current culture and reward structures.
"But dependency on government has never been bad for the rich. The pretense of the laissez-faire people is that only the poor are dependent on government, while the rich take care of themselves. This argument manages to ignore all of modern history, which shows a consistent record of laissez-faire for the poor, but enormous government intervention for the rich." From Economic Justice: The American Class System, from the book Declarations of Independence by Howard Zinn.
The rating agencies began as market researchers, selling assessments of corporate debt to people considering whether to buy that debt. Eventually, however, they morphed into something quite different: companies that were hired by the people selling debt to give that debt a seal of approval. Those seals of approval came to play a central role in our whole financial system, especially for institutional investors like pension funds, which would buy your bonds if and only if they received that coveted AAA rating.
It was a system that looked dignified and respectable on the surface. Yet it produced huge conflicts of interest. Issuers of debt — which increasingly meant Wall Street firms selling securities they created by slicing and dicing claims on things like subprime mortgages — could choose among several rating agencies. So they could direct their business to whichever agency was most likely to give a favorable verdict, and threaten to pull business from an agency that tried too hard to do its job. It’s all too obvious, in retrospect, how this could have corrupted the process.
And it did. The Senate subcommittee has focused its investigations on the two biggest credit rating agencies, Moody’s and Standard & Poor’s; what it has found confirms our worst suspicions. In one e-mail message, an S.& P. employee explains that a meeting is necessary to “discuss adjusting criteria” for assessing housing-backed securities “because of the ongoing threat of losing deals.” Another message complains of having to use resources “to massage the sub-prime and alt-A numbers to preserve market share.” Clearly, the rating agencies skewed their assessments to please their clients.
If this were a movie, everybody would learn the obvious lessons. The folks in the big investment banks would learn that it’s valuable to have an ethical culture, in which traders’ behavior is restricted by something other than the desire to find the next sucker. The folks in Washington would learn that centralized decision-making is often unimaginative decision-making, and that decentralized markets are often better at anticipating the future. But, again, this is not a Hollywood movie. Those lessons are not being learned. I can’t wait for the sequel.
In other words, in the absence of manufacturing, the only way to compete with Third World nations is to become a Third World nation, which is exactly what will happen if we allow our middle class to disappear.
What's more, it's not just manufacturing and lower skilled service jobs that are disappearing. According to the Hackett Group, companies with revenues of $5 billion and over are expected to take an estimated 350,000 jobs offshore in the next two years alone -- nearly half in IT, and the rest in finance, procurement and human resources. ...
And Booz Allen Hamilton, in a 2006 study, found that white-collar outsourcing is no longer just about call center and credit card transactions. Now "companies are offshoring high-end work that has traditionally been considered 'core' to the business, including chip design, financial and legal research, clinical trials management, and book editing." Do you hear that? It's Ross Perot's giant sucking sound being cranked up to a deafening roar -- and it's about a lot more than NAFTA.
Accenture now employs more people in India than in America. And IBM is headed in the same direction. ...
We are continuing to feel the sting of our lack of investment in our people -- particularly when it comes to education, the other primary pillar (along with a good job) of a healthy middle class. This is what happens when a country is willing to spend trillions of dollars fighting unnecessary wars while allowing college tuition to rise out of the reach of so many of its citizens. And it's what happens when a country turns its economy over to the casino of Wall Street.
In what almost added up to a light moment, Senator Mark L. Pryor, Democrat of Arkansas, said the public wanted to know what went wrong and “how we can fix it,” adding that Americans feel that Wall Street contributed to the financial crisis. “People feel like you are betting with other people’s money and other people’s future,” he said. “Instead of Wall Street, it looks like Las Vegas.”
Senator Ensign said he took offense at the comparison, saying that in Las Vegas the casinos do not manipulate the odds while you are playing the game. The better analogy, he said, would be to someone playing a slot machine while the “guys on Wall Street” were “tweaking the odds in their favor.”
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