IBM-HQNews in the last few hours that IBM is rumoured to be chopping up to 118,000 staff across the globe, or, 26% of their total workforce. A well-respected blogger (except by IBM), Robert X Cringley has claimed that sources in Big Blue are preparing to carry out the corporate mass-execution of the century (my words). So what is going on?

Duncan Garner rang me today and asked how much credence we could place in the rumour and the likely impact on New Zealand workers. Why was it happening, if it really was, and how much did “The Cloud” have to do with this?

The Cloud has quite a lot to do with it I would suggest. IBM has an archaic business model and has been late to Cloud, not as late as some (see HP), but its in catch up mode. Worse, the numbers aren’t great, while IBM is making some (I think dubious) claims about it’s Cloud revenue, the overall machine is suffering. While the rest of the global sector has grown thirty-five percent in the past couple of years, IBM has sunk twenty-five percent.

IBM reacted uncharacteristically vehemently and personally against Cringley, the $93B company calling him a “gadfly.”

Gadflies came up because IBM finally reactedtoday to my last column predicting a massive force reduction this week. They denied it, of course — not the workforce reduction but its size, saying there won’t be even close to 110,000 workers laid off — and they called me a gadfly, which was apparently intended as criticism, but I’m rather proud of it. – Source

Wow. Big Blue goes straight after the messenger. You can always be sure that anytime someone attacks you personally, you’ve hit close to the bone and they are really annoyed.

“IBM does not comment on rumors, even ridiculous or baseless ones,” the company said in the email. “If anyone had checked information readily available from our public earnings statements, or had simply asked us, they would know that IBM has already announced the company has just taken a $600 million charge for workforce rebalancing. This equates to several thousand people, a small fraction of what’s been reported.” – IBM

Regardless, big changes are coming.

Now if this is true then Big Blue may just destroy itself in the process. Dropping a quarter of your workforce is, well, insane. It’s the equivalent of sawing your leg off to get away from being trapped under a boulder. Highly risky, very desperate, and likely to induce death.

What is clear is that old business lines are likely to be for the chop. Including the mainframe. Not a good idea to buy a mainframe and you’re in for a bad time if you own one I’d suggest.

In New Zealand, we could see a number of effects.

Nothing. Sometimes the regions just don’t get touched, remember that IBM is probably using New Zealand as a tax break as well, and money motivates them.

Last figure on IBM employees was around eight hundredish, I think. Yes, I know, not accurate but I struggled to find anywhere that detailed it. Let’s say eight hundred. That means that up to two hundred staff could face the axe.

Given that the IT market is super-buoyant, that number of people is going to be sucked up reasonably quickly.

Especially by the dozen or so local competitors who will just love to have more staff for their growing business, all those relationships, and customer information. Ouch.

Once again, this is a new business model crashing into an old business model. IBM have server hugged for too long and now the damn server has fallen on them. The arm must come off or the beast will starve. The only question is, how much of the arm.

Another thing is for certain, IBM is a clever creature. You don’t last as long as you have with the amount of innovations and inventions plus the huge amount of research and development. You can’t count them out.

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