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IBM forgot the most important part of running a business. While shareholder value is important, it is customers that make business possible.
Under Sam’s leadership IBM began to cut quality, cut corners, and under-deliver on its commitments. IBM squeezed every penny out of every deal without regard to the impact it would have on customers. And those customers have paid dearly. The reputation IBM earned over a century was ruined in a few short years. ...
IBM’s Global Services have seen the worst cost cuts and the most layoffs. These cuts have hurt IBM customers. Many contracts have been cancelled and sales lost. IBM is no longer considered to be a trusted supplier by many of its customers.
To fix IBM it needs to invest in Global Services and in its people. Yes, there are already quality improvement programs and automation projects, but these efforts are new, few, and small. Their focus is at the account level, not the organization. Most of the problems are at the leadership level, where profit has been the only priority. Global Services is in crisis and IBM needs to get serious about fixing this organization.
IBM is hemorrhaging talent on a global scale across all divisions. It cannot retain good people. IBMers, as they call themselves, are underpaid, neglected, and have been abused for years. Most of IBM’s 400,000+ employees are no longer working for the company. Their jobs have become nightmares. They are prevented from doing good work. They know IBM is neglecting its customers, but they are powerless to do anything. The best they can do is to try to survive until reason returns to IBM’s leadership, if ever. ...
Global Services is horribly inefficient. There is very little automation. The business information systems are poor. IBM has too many people managing accounts and too few servicing them. Global Services is in serious need of a business process redesign and better information systems. For the last 10 years all IBM has done is replace skilled American labor with cheap offshore labor. IBM’s workforce of 400,000 workers looks impressive. Ask IBM how many of them have minimal education and have worked for IBM for less than 3 years? That huge workforce is now a hollow shell of a once great company. ...
IBM’s current management approach has crushed the life from most of the software companies it has purchased. Software is not a business you can carve into pieces and scatter all over the world. Software works best when there is a short and tight communications link between the customer and a dedicated product development team. Product development needs to understand the needs and directions of the customers, it needs to be empowered to design new products and versions that will increase its value to the market, and it needs to be enabled to produce those products and versions quickly and efficiently. ...
The Respect Problem – Today in IBM “Respect for the individual” is dead. So is “Superlative customer service.” Every decision made by IBM for the last 10 years has been to find ways to spend nothing, do as little as possible, and get to $20 EPS. IBM’s workforce is operating in survival mode. They have no voice, no means to make IBM better, and they are certainly not going to stick their necks out. IBM is squandering its greatest resource and most of its best minds. Most of IBM’s businesses are declining. As business declines IBM cuts staff. Quality and services get worse and business declines even more. Execution gets worse. Every day customers trust and respect IBM less. They buy less. IBM needs to break this cycle of insanity. They need to start treating their employees better and mobilize them to save the company.
The Leadership Problem – IBM has no vision, none, nada, zip. CEO Ginni Rometty and her cadre have no clue how to fix what’s wrong with IBM. And even if they did, they are too tainted by the current state of the company – a state they created. IBM executives are for the most part in a state of paralysis. They don’t know what to do. They know their business has serious problems. Even if they knew what to do they’re afraid to act. Ginni and the $20 EPS target had most of the senior executives frozen from doing anything. This type of management style can be fatal for business. The CEO should be helping each division become more successful. Because $20 EPS has been the only goal, IBM’s senior leaders have become unable to manage their businesses. ...
Here’s why current management can’t do the job. If the current VP-level managers at IBM (the only level, by the way, that’s allowed to even see the budget) take action to spend some of the profit to fix their businesses, they’ll be in hot water with Ginni Rometty and IBM’s culture of blame simply for trying to do something. Just watch: Ginni’s plan to save the company will involve further cuts. You can’t cut your way to prosperity. If they take action and the fix doesn’t work, then they’ll be punished for trying. So the only obvious option current management seems to have is stand by and watch Ginni and the finance department kill their divisions. ...
Thankfully IBM gave up on its 2015 goal of $20 EPS. Unfortunately IBM still plans to continue cutting staff to reach prosperity, which is insane. By now it should be painfully obvious this is destructive to the company. IBM needs to step back and be honest with itself and its shareholders. It needs to set reasonable budgets and financial expectations. It needs to spend more on its people and on improvements. IBM needs to regroup and repair the company. For the next three to five years IBM should plan on turning in lower, but still good profits. If they do this by 2020 they could again be a business juggernaut.
Selected reader comments follow:
The annual Big Data (or whatever buzz term they are using this year) is next week and attendance numbers are way down according to a vendor friend who attends the event. My Cognos support renewal came in at a 20% increase this year. IBM says that is because they simplified the licensing model and added functionality. BS This is on top of large increases every year since IBM bought Cognos. That is one way to gain short-term profit while implementing a customer elimination strategy.
We passed on IBM SPSS for SAS. It was a great decision. SAS gets customer service, IBM does not.
The bleeding will continue.
Think about real productivity. Most tools in use have followed the failed client server model, you have to be connected to do anything. This is a real problem for the road warriors that are the customer facing bodies. Hotel and airport connectivity is just not substantial enough to use these “tools.” This had real productivity costs, and hurts morale when worker bees are dinged for not getting mindless admin done when it is impossible to do so.
More real technical staff is an urgent requirement, both to support sales but also to support customers trying to implement software/hardware.
Recognize that not all technical staff are interchangeable parts.
Remember who pays the bills. It is not IBM execs. It is not stock holders. It is customers, and if they are not happy they don’t pay their bills, they do not buy the second license of the product (that second license is where real money is made, as you do not have to spend to make that sale), they cost more in support, etc.
The grandest strategy often fails when the sergeants that have to implement it run up against tactical reality. And sometimes the strategy has to be abandoned, especially when it is crafted by first lieutenants who have never implemented anything.
An ongoing successful company has to balance between the needs of existing customers and systems, and what looks promising for the future. It has to reward both the grinders and the brilliant fireflies – because it takes both to produce long term value and income for all involved.
Since 2000, IBM spent some $108 billion on its own shares, according to its most recent annual report. It also paid out $30 billion in dividends. To help finance this share-buying spree, IBM loaded up on debt. While the company spent $138 billion on its shares and dividend payments, it spent just $59 billion on its own business through capital expenditures and $32 billion on acquisitions. “All of which is to say that IBM has arguably been spending its money on the wrong things: shareholders, rather than building its own business,” Mr. Sorkin writes.
“The buybacks and dividend payments have managed to keep activists and vocal hedge-fund investors at bay ‒ at least so far. But if IBM’s performance doesn’t turn around, and soon, Ms. Rometty may face a mini-mutiny,” he adds. “The question for Ms. Rometty is whether she can figure out how to turn around IBM — not just its numbers, but also the company itself.”
Today Rometty finally abandoned “Roadmap 2015,” announcing that IBM cannot hit the target after all. IBM also said it will pay a chipmaker called GlobalFoundries $1.5 billion to take its chip division off its hands, while also taking a $4.7 billion charge. And IBM reported its third-quarter results—a 10th consecutive period of falling sales, marked by weaker performance in growth markets. “We are disappointed in our performance,” Rometty said in a statement. “We saw a marked slowdown in September in client buying behavior, and our results also point to the unprecedented pace of change in our industry.” In response, shares of IBM were down more than 7 percent on Monday morning, Oct. 20.
I wrote, for a May 22 Bloomberg Businessweek cover story, about Rometty’s nearly impossible task of reinventing IBM for the era of cloud computing while handcuffed by the “Roadmap.” IBM is 103 years old and has survived upheavals in the technology industry before—selling mainframes, then personal computers, then getting into the consulting game. Rometty will tell anyone who listens that the changes demanded of IBM today are as great as they’ve ever been. One question is whether IBM has the technical chops to compete with Amazon and others: After losing a lucrative CIA cloud project to the upstart, IBM had to acquire a small competitor, SoftLayer, to competently provide the services its customers are now demanding. The arrival of cheap cloud computing means that corporations don’t need IBM’s big, expensive mainframes. And even if IBM does catch up, the cloud might be such a thin-margined industry that it can’t sustain the profit margins IBM had been telling investors to expect. Until today.
This morning’s sell off is the worst in four years for IBM, Bloomberg News reported. “IBM needs to find success and growth in the cloud through organic and acquisitive means,” Daniel Ives, an analyst at FBR Capital Markets, told BN. “Otherwise there could be some darker days ahead for the tech giant and its investors.” In other words: Focus not on financials but on making stuff people will pay money for, or else.
Selected reader comments follow:
All of them have failed multiple times in actually monetizing the R&D investments of the past three decades, infusing a culture of innovation into a firm that once was able to capitalize on new products, and most importantly NOT "growing by cutting" — it is hard to emphasize the demoralization that cutbacks bring to even the most resilient employees.
Earning growth absolutely HAS TO COME from expanding into new markets, increasing "top line" revenues and being the kind of innovative firm that attracts talented employees.
If Rometty learned anything from Palmisano it should be that IBM does best when it SELLS MORE THAN ITS COMPETITORS, if the mix of software, services and hardware is such that clients see the value the revenue is impressive. Conversely when the value is NOT apparent clients flee and revenue falls.
This might sound like sort of advice that one could learn from "Chance Gardner" in Being There but apparently all the inbred Ivy League MBAs that typically serve on Big Blue's Board and inhabit the fancy office suites of the firm's far flung enterprise need to spend less time on "roadmaps" and more time looking at what clients are spending money on.
IBM will not be able to turn itself around and will gradually sink into the sunset, to be sold or bought up piece meal. Not because it can't come with a winning business plan, but because there is not a single employee at IBM that would not jump to almost any one of its competitors without a second thought if given the opportunity. IBM will never be able to recapture a culture that will allow it to attract and retain the employees it needs to take it into the future.
Instead of laying off people to cut the "expense" of human capital, they should invest in their people and create a culture of innovation at IBM. In this fast-paced industry, only the firms that continuously innovate are the ones that will be in the game for the long haul. To create "disruptive innovations" you need the right people with the right ambition and drive to make IBM once again a great company.
I know for a fact that IBM has the capability. I'm still betting it has the political will. If I have a doubt, it's with Ginni. It's time to step up or move on.
Your employees will not put out 110% when they know any day now they may loose their job. Besides employees cant put out even 80% when they are constantly busy updating their Resume and looking for a better employer. Contrast that with Google employees and others who love their company!
Also, IBM acts like a firm, only promoting to executive ranks through internal resources. Essentially, they have no infusion of outside talent at all. Meantime, the promotions are based on who you know, and are not merit-based (regardless of what anyone says). So they dangle the carrot (like at law firms), the difference being that at law firms you have a chance at making partner if you are a rain maker. Just a terrible way to freeze a bad culture in place.
Sadly, there are a number of former colleagues who are still there. Why, I have no idea. It's a bad company with bad executives who make bad decisions for bad reasons.
IBM has an army of bean counters making decisions without any understanding how the products can solve customers problems because the bean counters have not used IBM's products to solve problems similar to their customers'.
My company's CIO outsourced our infrastructure to IBM in 2009 (after receiving a nice fat bonus of course). Since then, the mean time to get a server racked and built ballooned from a couple weeks to almost a year. You cannot get an American engineer on the phone when you call for support. Even worse, the bureaucracy and red tape needed to get *anything* done has skyrocketed. Of course, my company's senior leadership won't hear any of that, and the CIO (now thankfully on his way out) actually told our staff to "stop complaining about IBM" point blank at one of our IT town hall meetings. Basically, you could either shut up, join the cheerleading staff, or find another place to work.
Poor customer service, serial outsourcing/layoffs, late entry into cloud/hosting, lousy SW products (Notes, Sametime, Tivoli); No wonder IBM is foundering. Used to be a great American company. What a shame.
On Monday, the computing and software giant abandoned a longtime earnings target, reported sharply lower third-quarter profit on a surprising 4% downturn in sales, and said it would divest semiconductor operations that underpin much of its remaining computer business. ...
“Our results this quarter were disappointing,” IBM Chief Executive Virginia Rometty said after disclosing the weakness in services and software and a large write-down to divest the semiconductor unit. “We’ve got to reinvent ourself like we’ve done in prior generations.”
It was IBM’s 10th consecutive quarter of flat or declining sales. The results stood in contrast to Apple Inc., which on Monday posted a 13% profit increase on strong September sales of its larger-screen iPhones.
The Armonk, N.Y., technology giant said it no longer expects to earn at least $20 a share next year, a forecast it has maintained for five years and under two chief executives. IBM didn’t offer an estimate for next year, saying it would offer a new outlook in January.
Selected reader comments follow:
IBM is getting rid of its technology. The Intel servers, and now the chips. I wonder how long before is only a services company with no technology to sell.
Is it true that Rometty's only quarter of positive news was her first? Very sad.
For the previous decade before she was appointed CEO, IBM had been trimming the 'fat'. All back office work had been moved to lower cost centers regardless of the impact on getting business done. Outsourcing started to onshore lower cost and lower quality staff as a way to retain margins. As contracts ended, customer renegotiated lower prices forcing lower margins. Repeat the cycle enough times you have a death spiral.
IBM focused on their core customers only. How much money could they suck out of their existing client base, providing steep discounts. IBM never focused on building relationships in their SMB space.
IBM played accounting tricks and didn't reinvest in products. If a product was mature, it meant less cost in maintaining and enhancing while enjoying a slowly declining revenue stream.
By the time Rometty got in control, it was BAU only there was nothing left to cut. There's more, but you get the idea.
Watson? A solution looking for a problem.
Bigger problem... IBMers arrogance. (But that's another story.)
The biggest problem is inertia. IBM will have to revamp their culture from the ground up. And that's something I don't think that Rometty and her senior execs have the ability to make happen.
Full disclosure. I escaped the 'Borg.
IBM needs to bring lots of fresh blood and inject some out of the box thinking into their strategy for them to survive. Selling their chip foundries is one of their worst moves.
But Ms. Rometty insisted that IBM’s “very bold moves” since she became chief executive nearly two years ago — multibillion-dollar spending programs for data analysis software and skills, cloud computing and Watson artificial intelligence technology — were the right ones. “The strategy is correct,” she said. “Now it’s our speed of execution that needs to improve.”
Faber noted it was a “difficult day” for IBM, to which she nodded her assent. In the conversation, she implies there will be layoffs, when pressed by Faber on the matter. Here’s a rough transcript of the Q&A: ...
Ginni Rometty: The third quarter earnings were disappointing, we saw some slowdowns in service productivity and in software. But we had another announcement which was all about taking this company to the future. We are transforming, we are reinventing the company. You just need to look to the results. Again in this quarter, they [the strategic initiatives] accelerated. We are reorganizing this company around analytics, around cloud, around social, local, mobile. Take a look at cloud, revenue growth was greater than 50%, again. This point about us continuing to move this company to higher value is what it’s all about. The divestiture to Globalfoundries is part of that. This year we will have divested $7 billion of revenue. But it’s empty revenue.
DF: Are there going to be layoffs?
GR: We’ll announce some restructuring actions we’ll take. That will increase our speed and simplicity. I was with 30 of our biggest clients a few days ago. What they were talking about is the role IBM can uniquely play about being the navigator. When it comes to an enterprise, yo’ve got to emigrate them. We always said three things would make a difference on cloud: hybrid; data; security. All that is coming together now.
Selected reader comments follow:
It is my hope that IBM shares drop out the bottom. IBM management has to begin caring about growing the business more than engineering the stock price. Warren Buffets idea to ”languish” the stock price to allow repurchase only works if there is revenue to back it up. With no vision, no real design. IBM will do worse...my question is...when will someone fire Rometty?
IBM's closely-watched services backlog fell 7% Y/Y in Q3 to $128B, a much sharper drop than Q2's 1%; the company declares it saw "insufficient" services productivity. Also worrying investors: Gross margin fell 90 bps to 49.2%, ending a long string of Y/Y gains.
IBM and GlobalFoundries announced the mega sale that will have a far-reaching impact on IBM's massive footprint through the Hudson Valley and across New York.
Selected reader comments follow:
And they've delivered so poorly in their Global Services divisions, that companies in long term contracts will be moving away from IBM as fast as their legal legs will let them. IBM will be selling it's hosting services because there's nobody left stupid enough to sign a contract with them.
Nobody young I know wants to work for IBM and all the older people are just counting the days until they can get out and away from the constant fear of layoffs. A young guy I know, perhaps the best IT guy I have ever met, was offered a job at IBM. He turned it down because he did not want to spend his life wondering every quarter whether he was going to lose his job.
IBM so totally screwed up its employees it seems to be in a death spiral. Nobody good wants to work there and those who do work there (at lease those I know locally) are practically paralyzed by fear. I would not wish employment at IBM on my worst enemy.
One thing I can do here is consider the way IBM CEO Ginni Rometty is spinning this story. She was all over the news on Monday repudiating the 2015 earnings target set by her predecessor Sam Palmisano and more or less claiming to be a victim — along with the rest of IBM — of Sam’s bad management. Well she isn’t a victim. Ginni was an active participant in developing the Death March 2015 strategy. And as CEO — now CEO and chairman — it’s laughable to contend, as Ginni apparently does, that she has been somehow bound by Sam’s bad plan. ...
Ginni Rometty is in trouble along with the rest of IBM. She’s leading a failed strategy laid out in gruesome detail in my IBM book (link at right — buy a bunch, please) and appears to have little or no idea what to do next. Having finally repudiated that crazy 2015 earnings target, the market will allow Ginni to reinvest some of that money in trying to save IBM’s core businesses. But it isn’t at all clear she knows where to invest or even why. If that’s true, Ginni Rometty won’t survive much longer.
Selected reader comments follow:
What I don’t really get is why IBM and others seem to think that experienced employees are easily replaceable by low paid employees who use a script to follow along. That might be fine for simple issues, but once the complexity level gets ratcheted up all of the people who could fix that sort of problem quickly are all gone.
Unless, of course, that’s the entire point: more billable hours.
The real smart staff leave way ahead of making DE as renumeration is so poor or the bureaucracy drives them off – I was surprised that I made it – but it is all about playing the system of hoops. Directors and VPs do not even have to jump these hoops – they get promoted as ‘good old boys’.
When I see Ginni recognizing this and starting to fire some of these loudmouth executives off – I will believe the company is turning around.
I’ll add that managers and executives are a protected species and the employees who don’t brown nose and tell customers the truth are the endangered ones. As they say in the consulting business, Ginny is “part of the furniture” and she had a hand in causing the problem throughout her career. It’s time for a true cleansing and not led by another con man like the cookie monster. If the company is to survive, they need a true leader, not a financial engineer come publicity hound like Gerstner.
BTW, the current top technical types are suspect as well. I remember to this day when Irving B. quietly told me “Remember, it’s who you know, not what you know, or many of them are just politicians disguised in “techie skins”. We need to clean house there as well.
When I got certified, I was told the rewards were coming…just wait!
Then I was told to get senior certified, and the rewards would come…just wait!
Then I was told to hold on until I got my promotion to band 10, and boy, the rewards would start pouring in!
Then I was told if I could just make it DE, THEN I would be rewarded for all my hard work.
Instead, I updated me resume, interviewed with almost every big name tech company out there, left, and was VERY richly rewarded on the outside.
I left to become a director elsewhere, and I’m now at the VP level. I’m also now fairly compensated against the market place. I’ve had more fun in the past thee years since leaving, and have learned more than I could ever have at IBM.
My ONLY concern with IBM now is that I still have a lot of friends there, and I really want them to have fun again. I want for them what I have. I’ve heard from most of them this past week…everyone of them have their parachute strapped on, and are ready to jump. If you think there was a brain drain before, just wait…some hugely talented folks with serious chops are out there interviewing as I write this.
Higher ups were judged on x US bodies vs x Global bodies. Moving responsibilities from A to B would disturb the ratio of US vs Global bodies that they were being measured upon. No training, no education, no focus on combining inefficiencies, everyone was so protective of “their territory” that it simply came down to how many had to be excluded from the boat. Once the boats became somewhat spacious, they were replaced with smaller ones. Rinse, lather, repeat.
Add in a pathetic, time consuming and entirely laughable capital acquisition process and HR bots to make sure no one strayed outside the lines and the stage was set. Accomplish nothing, but heaven forbid do not make any waves outside the box or question decisions being made.
Failure to comply stamped RA in a column of a spreadsheet. $125 will arrive long before it ever climbs back to $200 if that is even possible at this stage. Keep writing Bob, maybe the sun will shine again someday.
What is amazing is how long the ‘financial engineering’ approach has worked. Served Palmisano very well, and Rometty has ridden it until there is no more juice left in the tomato. Now she recognizes this and is passing the blame. Sorry, you ARE part of the problem Ginny.
This company needs a lobotomy from head to toe. And those inside (and those who’ve recently left) know that. But there is too much arrogance to effect the change needed. Cost-cut yourself into oblivion IBM. Just too bad so many good people have had to suffer because of the greed and arrogance from the top.
So, one Canadian guy writes a response along the lines of ‘you are the captain. I am just a stoker’. He then goes on to say her message told him nothing other than ‘just follow the captain’. He then goes on to say he has ‘zero faith in IBM leaders. He trusts them as far as he can kick a moose’. Followed on by how he does worry for his customers. He then goes on to talk about how IBM has disabled its technical staff by under investment and idiots at the center dictating
This guy gets 266 likes. That does not sound a lot – but you are lucky to see 10 likes on a particularly brave post. He even managed to get a number of people to comment and stick their necks out.
One brave guy – where the culture is now one where the most skilled serfs mean nothing.
I hope he and the 266 people who liked that are still in IBM by Xmas. Time will tell. The fact is the company is gutted and increasingly our teams are made a mockery of by client tech staff in key meetings who know more than we do. It is nothing to do with education – there is plenty of foil-ware and virtual courses. It is because we get no hands on anymore – you have to show the dog the rabbit. Hands on is supposed to be done in India by cheap labor. So, the immediate response in past few days – offshore more aggressively and cut costs further. The hollow suits in command know no other way.
They need to get back to the basics and resource action should be applied to the layers and layers of management. Turning the Queen Mary around is a huge challenge. I just hope it is still possible. I think it is very sad. There was a day many years ago when people were proud to say they worked at IBM. Now they just ask do you know anyone who is hiring? The employees live in fear of losing their jobs. People in that state cannot be productive. I am sentimental and I hope they can recover.
@crow, there are and were amazing people and ideas there, but they are either leaving, were exiled to Lenovo, or are hanging on in quiet desperation and depression, waiting for retirement or a package offer. I moved on, and I’m proud of my business card again, but I am saddened at what used to be and what could have been, and the friends left behind. I think IBM may survive, but as a very different company, selling other people’s stuff and ideas.
@Bob, thanks for the book, it was a riveting read having lived a great deal of it. Some things became clearer when I saw the bigger picture of what was going on 6-8 years ago when I started seeing the cracks opening., about the time abandoned the “innovation” buzzword and all those asterisks (which they apparently sold in bulk to Walmart).
In the two years it takes to vampirize each acquisition, almost nothing is invested in them to improve them or keep them current. And why should they when 50 startups will do the work for you in the next 2-5 years. Of those 50, 45 will disappear and the 5 remaining will be in a beauty pageant where IBM, Oracle, Microsoft, HP, etc are all looking to buy.
If IBM fired every single non executive US employee and re-incorporated in Abu Dhabi, who would be shocked? Again, why not? It’s not really a company anymore in the classic sense of the world. It’s a few hundred attorneys and accountants.
What we get is often very junior people starting with IBM (fresh out of a college) and get a few months of experience and then jump ship once they’ve got some experience to another company that will pay double for the same work they are doing at IBM.
I’ve been dragged into a Cloud proposal project for my customer because ‘they need a Windows guy’ – the project has no funding so they are pulling in people from normal support roles to help design and build the solution being proposed. Instead of working out what particular skillset they need from the ‘Windows guy’ and perhaps getting the right skills for the job they’ve pulled a name out of a hat and I’m it.
And this seems to be happening on just about every account – teams cobbled together and told to spend at least 20% of their time working on Cloud proposals (essentially people reinventing the same things over and over.) Manager told me “The work you do now is a dead end, there is no future in it. Cloud is the future…”
I’ve got a very good relationship with my customer and one of their recent comments was “Why should we trust IBM with these new technologies when you aren’t delivering the expected service on our existing technology?”
GlobalFoundries will take over IBM’s fabs in Dutchess County and Vermont and get IBM’s semiconductor workforce as part of the deal the two companies announced Monday.
More than 5,000 IBM employees from New York and Vermont will become GlobalFoundries employees, although the companies would not say how many are in New York.
However, some Vermont employees will be asked to move to Malta where GlobalFoundries operates ita Fab 8 factory. ...
However, not everyone is celebrating, says Lee Conrad, national coordinator for Alliance@IBM, an IBM union organizing group formed by the CWA. IBM workers are not unionized but the group tracks layoffs and supports employee rights.
“It is sad that IBM continues to shed business units and employees,” Conrad said. Instead of Big Blue it should be Little Blue.” ...
The deal will cost IBM $4.7 billion, including $1.5 billion in cash to GlobalFoundries.
Meanwhile, IBM's top insiders haven't been buying. They sold millions of dollars worth of shares earlier this year. According to summaries of insider sales filings, Ginni Rometty, the president, chairman and CEO, made four straight sales in 2014 to collect $11.4 million. There were no buys, not counting stock awards given as part of her compensation. ...
Robert X. Cringely, longtime observer of the tech scene, in a Forbes article called "How to Fix IBM," wrote: "IBM is hemorrhaging talent on a global scale across all divisions. They cannot retain good people. IBMers, as they call themselves, are underpaid, neglected, and have been abused for years." ...
David Stockman, posting in Seeking Alpha, ripped IBM's long strategy of stock buybacks, in which IBM buys its own shares on the open market to boost the value of remaining ones. He called it "a stock buyback contraption on steroids."
"During the 31 quarters since the end of 2006, IBM has spent $111 billion on share buybacks and another $23 billion on dividends. But during the same time, IBM posted profits of only $107 billion," he said.
The company finally "admitted Roadmap 2015, or as employees called, 'Roadkill 2015,' is a failure," said the statement forwarded by Alliance@IBM, a group backed by the Communications Workers of America union. It said "enormous damage has been done to employees and the company" because of cuts made to try to reach the profit goal. ...
The statement said tens of thousands of employees have been terminated and that there have been pay and benefit cuts and lack of raises. Many workers have quit because of "toxic work environment," they said.
They said "unreasonable cost cuts" are impacting daily business needs and claim "loss of customer confidence."
The company plans more job cuts in the current quarter.
"Ginny said this morning in her depressing video to employees that we will simplify and streamline our company. Yup, we all know what that means. Buckle up and sign up, or bend over. Read those tea leaves, people. It s[...] to see your company crash this badly, but there is some gratification in knowing at least one of the causes is treating your employees so horribly an[d] underestimating the impact of the low morale you have brought upon yourself by those actions."
That streak is now in jeopardy.
With its roughly $168 billion market cap, IBM now ranks as the 19th biggest company in the S&P 500. Oracle Corp., and its $167 billion market cap, is right behind, followed by Merck Co. and Intel Corp, which each have market caps of about $155 billion. ...
IBM has reported falling revenue for 10 straight quarters and on Monday acknowledged it won’t meet a key profit goal, a development that prompted the latest leg lower for the stock. IBM also posted lower earnings in its third quarter and unveiled a deal that would see it pay Globalfoundries Inc. about $1.5 billion to take over IBM’s semiconductor operations and supply it with computer chips.
While IBM and CEO Ginni Rometty express bewilderment to go with their disappointment, here’s what people actually doing the work at IBM tell me has been going on.
The software group has been making its numbers mostly by increasing prices and through audits. They’ve been auditing customers and finding non-compliance, under-licensed software, then making quick sales to get customers back to 100 percent of software properly licensed. This is obviously not a business growth strategy.
The heavy layoffs (called Resource Actions (RA’s) because at IBM people are not people but resources) last quarter broke the back of many of the sales support teams. Ginni mentioned sales efficiency problems on today’s earnings call. Getting price quotes is now a very slow and painful process inside IBM. Last quarter’s RA’s clearly hurt this quarter’s sales. ...
IBM is losing a lot of business because its Global Services division is so poorly run. Customers of Global Services are unhappy and are not making new IT investments in IBM products and services as a result. IBM executives are painfully aware of the cause/effect, action/reaction relationship between Services and IBM sales to those customers. But they may well be too far into the problem for it to be easily corrected, so look for more of the same bad news in next quarter’s earnings and beyond.
But with sales stagnating lately, it may be time for company leaders to get a strategy lesson — from an unlikely candidate: Jack Ma, founder of Alibaba Group.
Here is the lesson from this fast growing company: customers first, employees second, shareholders third. ...
What is new is that some American iconic companies, finding complacency and comfort in old glory, have forgotten who is the ultimate boss of capitalist enterprise — the customer, not the shortsighted shareholder.
That seems to be the situation with IBM, in our opinion. The company’s leaders have been too busy trying to satisfy shareholders with buyback programs rather than pleasing customers by coming up with new products that beat the competition.
Since 2000, IBM has been on a share-buyback and dividend pay-out spree, loading its balance sheet with debt. “While the company spent $138 billion on its shares and dividend payments, it spent just $59 billion on its own business through capital expenditures and $32 billion on acquisitions,” writes New York Times’ Andrew Ross Sorkin. “All of which is to say that IBM has arguably been spending money on the wrong things: shareholders, rather than building its own business.”
Isn’t it paradoxical that Chinese entrepreneurs have to remind the American public that business building is a higher priority than pleasing shareholders?
"IBM is no longer a tech company," Cuban told CNBC. "They have no vision. What they've evolved into is a company that does [arbitrage] on acquisitions. It's stock buybacks. Who is IBM anymore?"
In the past, when you thought of computers or software services, you thought of "Big Blue," Cuban said.
"But today, they specialize in financial engineering. They're no longer a tech company, they are an amalgamation of different companies that they are trying to arb[itrage] on Wall Street, and I'm not a fan of that at all," he says. ...
IBM sent CNBC this statement in response to Cuban: "IBM will accelerate our growth strategy, creating a dedicated cloud business and specialized units to serve industries and professions being transformed by data and analytics. IBM will also continue to return money to shareholders, in addition to maintaining our commitment to R&D and to invest in our business. It is all part of our commitment to delivering higher value to our clients."
Within that, storage revenues were down six per cent year-on-year. ...
Is the storage business unit secretly up for sale, following in the footsteps of the the PC, server and microelectronics businesses? IBM is selling off significantly under-performing businesses it can't turn around into growth operations, and storage may now be in that category. ...
Analysts on IBM's earnings call asked if these results represented a crisis at IBM. That point wasn't answered directly, but the implication was that it was not. Rometty, who was on the call after not being present on previous ones, said IBM was already investing in higher-growth areas, such as the cloud and software-defined systems, and growth in these areas was good.
IBM shares will be in the penalty box for at least a year if not longer. This is the price to pay for a slow to no growth company that did not own up to reality when giving guidance to the street. While Ginni Rometty was part of the management team when the original $20 goal was presented in a large way she inherited the albatross when she became CEO in 2012. She and the management team kept pushing every lever to keep the quarterly and yearly numbers on track until everything hit a wall.
Pros: Watson is an incredibly interesting and intellectually challenging product. As a result, working on the Watson team feels like an academic environment where you can learn enormous amounts from your peers while building a world class product.
Cons: The Watson team still has some of the pains of being a part of such a large company—difficult red tape to cut through, design decisions where a bad technology was chosen because it is developed in-house rather than using standard technologies, etc. That being said, much of the structure of the team and their approach is constantly changing for the better.
Advice: The Watson team should be more cohesive and independent of the larger IBM culture. If IBM wants to attract top talent for Watson, they need to take hints from how the rest of the modern software world operates which is very different from the larger IBM culture.
Pros: Flexible hours and ability to work from home. I worked with some very intelligent and talented people. (Until they wised-up and found better employment.)
Advice: Good luck on getting SammyP's $225M payout when you go. The company will have been gutted by that point.
Pros: I have to say I have never worked anywhere with as much support infrastructure as IBM. The company is really good at understanding markets and pulling together solutions that meet particular needs. IBM Sales School is one of the best and equips people very well for sales roles. There are a tremendous number of really good people at IBM and many of them are very good at what they do.
Cons: I found the infighting too much to bear. As soon as an opportunity is identified people come out of the woodwork to get their fingers in the pie — especially from under-performing parts of the business. There are lots of people at IBM who are so-called experts with very little evidence to support that claim. I ran into a number of managers that seemed to be in their roles by virtue of longevity rather than any real management skill.
Advice: My one bit of advice is to do more to preserve acquired companies. IBM seems to suck the life of out of acquired companies and they wind up falling short of what was envisioned. IBM somehow, perhaps by design, makes life difficult for acquired personnel to the extent that many of the people who made those companies an attractive purchase struggle to find a reason to stick around.
Cons: No raises, no bonuses, constant fear of layoff, very low morale. While there are a few good managers, for the most part IBM really does stand for "I'm By Myself". You are in competition with everyone to have a good rating (which gets downgraded by default at the end of the year when the partners meet).
If you are on the bench between projects, watch out, as layoffs are now rolling layoffs. A lot of skilled, educated and experienced workers are being laid off in favor of offshoring and hiring of people with zero industry or IT skills.
I had to pay for my own training, and take vacation time to do it, because there are no training budgets.
IBM doesn't even leverage their own software internally (except Lotus Notes) and all the projects I were on were lacking innovation or learning experiences.
The flexible schedules no longer exist — when I started I could put in 40 hours Mon-Thurs and take Friday off. Now you are expected to bill min 44 hours a week to projects, spend Mon-Fri at remote client sites no matter how far away, plus travel time, and still find time to do internal required training that is usually fairly useless. All totaled I was easily entering 70 hours a week into the timekeeping system.
Advice: Respect and concern for employees from the top down, investment in those employees, training to keep employees on the cutting edge and innovation (without the recently announced 10% pay cut [training surcharge].) You can't get into cloud, mobile apps years after other companies are so well established and call it innovation, and you can't expect to truly compete with them especially when you can't implement these things properly internally first.
Pros: IBM as a legacy technology culture is one of the all time greats. Unfortunately, they have been going through an identity crisis for the past 40 years, and it isn't getting any better. Instead of inventing the future, they seem to want to copy other people's innovative business ideas, all the while filing new patent after patent on stuff they never product-ize. That said, they have a lot of brilliant people and a lot of opportunities across the map.
Cons: Putting up with the robots that run the show, and the sales/business development people they report to. They waste a lot of employees time with stupid useless extra-curricular stuff. They are clearly in decline in terms of technical leadership.
Advice: Understand that people in their 20s and 30s have an entirely different career arc that people in their 50s and 60s. Trying to treat a technologist with 40 years of experience the same as a kid who just graduated with a CS degree is an enormous mistake. The company is too big. Break it up into several smaller companies—the synergy is no longer working for you.
Advice: Fix competitive renumeration. Stop hiding behind processes to effect proper renumeration Improve social aspect of the organization.
Pros: Lots of career options, tons of education, work from home.
Cons: Very long hours—t is very difficult to get away from your work and take vacation. There is a lot of focus on internal activities and upward reporting. Micromanagement is everywhere.
Advice: Focus on the people and work life balance and the rest will take care of itself.
Pros: Diversity, well-known brand, fairly laid back environment.
Cons: An extremely mismanaged organization with years of declining revenue under Ginni Rometty's "leadership". Expect to spend most of your working day making sure that you are compliant to a large number of different internal procedures. Management tends to believe that this is what gives IBM the competitive advantage. If you are a "consultant", expect to spend months and months doing internal admin and eLearnings far way from any project — not a great place to get exposure to interesting work or to build any useful skills. For anyone considering a career in consulting, be very careful and explore your options!
There is never any money to do anything. Trainings are being scrapped, travel is being forbidden. Expense reimbursement is slow and complicated. Salaries are low and increases and bonuses are long gone. Even simple office supplies are often in shortage — and this is IBM in Western Europe!
They say you get to work with the latest technology and the brightest people. All the top performers have left. Expect to receive a used, empty, five year old laptop as your equipment, and extremely time consuming procedures to get the applications you need — nowhere near any leading technology.
The "management" has no ambition to understand their business or drive it in the right direction. Instead they a spend most of their time creating and promoting blog posts or videos containing very little substance.
The fact is, IBM will never ever survive. Everything is based on short-term penny pinching thinking — creating a very uninspiring working environment.
If you have any ambitions whatsoever, do not join IBM. There is no happiness or positive energy, only people trying to get out. You will regret it. More importantly, there is a real danger that you will be trapped, having acquired few new skills after a couple of years in IBM, hence making it very hard to move to any other respectable employer.
Advice: IBM is like Titanic; going towards a gigantic iceberg. Soon there will be nothing left to manage. Open your eyes, listen to your people. The software and "solutions" of yesterday will not save you tomorrow.
IBM could be a great place to work; sadly it is not.
Pros: Lots of opportunity if you're willing to put in the hours, follow their policies and practices, and get a little bit lucky selling business and working for and with good people, of whom there are plenty. Decent benefits. Lots of resources, but can be difficult to locate, access, and utilize.
Cons: Living with no raise in the last six years because I'm not rated in the top 5% of performers. Performance rated by people who know nothing about you and have very limited input and criteria. Promotions available but require tedious documentation, changing criteria, evaluation by people who again know nothing about you, other than what you put on your personal sales document soliciting a promotion, and have sales expectations, which is not where I or many want to go. No pension any more and 401K contribution diminishing.
Advice: If your intent is to foster and nurture a culture of self-serving employees, whose first concern is themselves rather than the client or the company, in all ways and at all times, then you are doing just fine. Personally, I didn't grow up and have not lived my life to be self-serving, but to contribute, earn my reasonable share, and be part of something bigger than myself with purposes bigger than myself. That's not what I see your management style inculcating; rather, the exact opposite. I'll be leaving before too long; good luck with that style, be surprised at what it yields.
Pros: Quite a bit of great hardware and software products that you can access and learn to increase your skills. If you can work independently, SWG, Lab Services, S&D, GBS, STG groups can be rewarding for those who like to get their technical expertise.
Learn the politics and find your contacts with the "real skills" to get things done. Be visible about your accomplishments or others will take the credit. If you are client facing, get enough technical knowledge "behind the story" to advise the client on how the client on how the technology will work in their environment. Ask more than one person and get an understanding of what groups do and what IBM services are available to you or you will drown. Plenty of ways to "play with the technology" but you have to be a self-starter.
Cons: A lot of managers and executives who strategically place themselves at meetings and do nothing. The famous "do you need help" is always communicated. If you ask, they pass the buck and deflect.
Everybody thinks they need to be at every meeting and most do their email after their 5-10 minute intro of themselves. Backstabbers, bad-mouthing certain roles/people, ridiculous amounts of large presentations to tell the story with very little on the technology itself being the star. Ridiculous amounts of admin overhead and internal meetings for nothing to "trick" senior executives that lower level managers and sales managers are working.
The advancement opportunities are "fake". Managers love to tell you to get certified, but most of the time you get nothing. The managers get the kudos for their teams being certified not those going through certification. Raises...what?!!???!!! Industry certifications should be just acceptable and for client facing roles, more acceptable to allow for advancement.
Too many people and roles stepping on one another in the S&D part of the world. The client team is unnecessary overhead and too many sales executives most of which provide little to no value. Too many of them don't really want to change and keep up with the times and not open to new ideas and innovations.
Advice: Cloud and mobile solutions could rise in sales if more development support and the technical professionals were actually technical and not sales people with a technical title. Sales executives who don't understand what they do force them to be sales people or ban them from clients making it hard to get real demos. Advice to move tech sales to SWG or another group and not S&D. where they can develop real demos and POCs.
The sales team should be a Sale Lead and a Technology Architect/Officer for all the technologies. They should be able to get brand reps, services, technical professionals, etc., to "get it done". Provide an outlet/deal portal to write a deal without brand reps/sales reps.
Sales leads, brand reps and client execs are the biggest roadblocks with their "I don't make any money off cloud and SaaS" or that product/service mentality. Seen many software and cloud initiatives requested by the client dropped because it is not in their product base or because the client didn't speak to the Exec or Sale Lead first. To circumvent this, allow people to "own it, do it, done" and reduce the layers needed to get to the actual resource. If I can create a mobile apps, why do I need to have the CTP who doesn't know how to develop a mobile app? Why can't I go to a resource directly or do it myself. Too many layers and baton passing to get to the right resource.
Flatten the sales organization and stop making sales process so convoluted.
For advancement, make external certifications carry just as much weight as IBM certifications. For client facing jobs, industry certifications carry more weight in many cases. Give fair raises.
Pros: Large company with a lot of career avenues to go down if you don't mind the cons (see below). High amount of 'life' in the 'work/life' balance (because of the cons...see below).
Advice: Move with the times. You are fast becoming outdated, if it hasn't happened already.
Pros: Strong support and training available, smart colleagues, (relatively) stable company, always a challenge around the corner. IBM treats its entry level employees fairly well, and the health care offered is fantastic.
Cons: Like others have said, as a consultant prepare to work long hours with clients that may not hold IBM in the highest regard. Also, in the near two years I've worked here, the company's financial performance has been declining. That has definitely reduced morale around the office, and the feeling by those around me is "why try hard this year, there are no bonuses anyway."
Advice: With improved financial performance overall, it would be a better place to work. I know that's not an easy ask.
Pros: IBM is still respected as a name.
Pros: Once a great company, but now living on past laurels. Pay is pretty good and benefits are average to good. Pays a bit more than lip service to the idea of work/life balance.
Cons: Totally focused on their 2015 road map, which is now a chain around their necks. With a lack of new revenue, everything is focused on reducing costs. That means continual layoffs, a move to low-paid contract workers, very few salary increases, and such a focus on cost controls that you need a VP to sign off on minor expenses and most employees have been buying their own office supplies for years.
Pros: Met many nice people, made some good friendships. Excellent experience for your first job, but then run far, far away!
Cons: Very poor salaries, management is truly pitiful, management standards are lowered each year. During five years working there, all benefits were canceled, one by one. Even meal vouchers, which are unofficial standard benefit in Czech Republic. Instead of Christmas bonus, employees were given fruit in cardboard boxes. I know this is hard to believe, but unfortunately it is the truth. Instead of promoting long time employees, new ones are being hired and given much larger salaries — doesn't make any sense.
Advice: Please do something about people managers and show your "lower level" employees that you care about them.
After months of public outcry, employee outrage and pressure on social media by the IBM Global Union Alliance, CEO of IBM Ginni Rometty, has at last "abandoned Roadmap 2015", the plan to deliver $20 earnings per share by next year.
While IBM focused on out of touch “Roadmap” goals, enormous damage has been done to both employees and the company:
Although “Roadmap 2015” has been abandoned, job cuts, pay cuts and a toxic work environment mean that the pain is likely to continue for IBM employees. Head of UNI ICTS Alan Tate said “The IBM Global Union Alliance strongly opposed Roadmap 2015, and we will continue to fight against job cuts and detrimental actions against IBM employees.
It’s time IBM executives listen to their employees and the unions, before this once great company is lost to executive greed and incompetence.”
Brought to you by Alliance@IBM; CWA Local 1701; Member, IBM Global Union Alliance; www.allianceibm.org
In fairness though I've been to the U.S. to work with my American colleagues five times in the last 12 years. Each time it's clear: the U.S. situation is worse and getting worse and each time it's clear you guys don't recognise it.
Also I think the next stage after hitting roadkill 2015 would have been to break up the company for profit (of Buffet and the directors, not you). That's probably still the plan. Best of luck from your friends in AP.
To those who say sack middle managers that's an illusion. For starters they really don't exist in most places anymore, except by label only because all basic bean counting and resource management is offshored and all project, people managers and partners since roadmap 2015 have the same or higher utilization targets than us plebes.
Best yet, all IBM related project and people management time is counted as non productive or disallowed in cost cases to disincentivise proper management of employees yet have scapegoats ready if things go wrong. Also calling someone a manager or having large numbers of unnecessary people managers is a union busting method used in the U.S. IBM has so many "manager" titles because managers cannot be in a union by law even though the roles are not really as such. -BlueRover-
...Additionally, as we execute some of our plans to drive simplification and accelerate productivity in our business, we expect to take a workforce rebalancing charge in the fourth quarter. We are starting to work through our plans, but at this point we'd expect to take a charge of up to $600 million. We have also had a dramatic move in currencies, and we've taken into account an impact based on current spot rates."
Alliance reply: Former IBM CEO (and Rometty's mentor)Sam Palmisano initiated Roadmap 2015. He's retired and long ago insulated from any "firing" suggestions. Any other ideas? How about focusing on the workers getting organized? Never mind 'time to shed her and her cronies'. Focus on the workers. Organize them. We can help.
"From a culture perspective around the shift to — around the shift to global delivery centers, quite frankly we've not been as aggressive here as others have been. So we think we have an opportunity — we have an opportunity move more that work to where we can put it into a more common platform. So yes, the overall — yes the overall headcount is coming down and yes, we will be moving more aggressively into the global delivery centers, but again we have not been as aggressive as others and then the other thing I point out is that reduction in overall headcount also allows us now to think about how we simplify our business and some of what you heard in my prepared remarks were around trying to simplify the business."
Eighteen years ago when I joined IBM band 8s would have 400-600 people easy reporting to them. But now that's not the case. The biggest reason for the collapse is simple. The denuding of the technical capability of the company in terms of front line consultants who can actually deliver. Sacking of consultants, or selling their roles to Manpower, and even partners while on client engagements which led to massive losses of faith and airing of dirty linen in front of clients. In many cases this has been done to people on cams engagements - so that puts the lie to the strategy the top brass put out there. -BlueRover-
I'm getting bombarded with canceled client meeting notifications and amusingly, hammered by demands from every level of management to participate in the employee charitable contributions (ECC) program. Don't they realize people haven't had raises in years, making less money due to inflation, and concerned about their impending firings? *This* is what they are worried about and spending energy on and pestering demoralized employees about!?! Ship adrift in Dilbertland. -ShipGoingDown-
This happens time after time. The internal 'cloud' meeting crashes continually, and can't scale when more than a few people join. The audio over 'cloud' is horrendous, so people are told to 'dial in'. The internal infrastructure people need to do their jobs, starting with that horrible piece of you know what called Notes, is counter-productive. Unionize and demand better working conditions, if you plan on being around! -LowMorale-
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