Why is IBM sneaking around?

Second in a series. IBM’s 2015 plan was hatched to deliver $20 earnings-per-share to the delight of Wall Street. IBMers were offered a carrot, a few shares of stock granted at the end of 2015, as a reward for helping them achieve that target. It appears that IBM’s goal is not to issue any of those grants as they continue to conduct resource actions (IBMspeak for permanent layoffs) and remove talented and valuable US employees in favor of moving work to low cost countries such as Brazil, Argentina, India, China and Russia.

Work that stays onshore is mainly sent to what are called Global Delivery Facilities (GDF’s), two of which were created at heritage IBM locations (Poughkeepsie, NY and Boulder, CO) while starting new ones in Dubuque, IA and most recently Columbia, MO. IBM’s public position is they are creating jobs in smaller towns when in fact they are displacing workers from other parts of the United States by moving jobs to these GDFs or to offshore locations.

Something not right in Dubuque

In the case of Dubuque and Columbia, IBM secured heavy incentives from state and local governments to minimize their costs in these locations and are achieving further savings by paying the technical team members, most of whom are new hires or fresh college grads with no experience, a fraction of what experienced support personnel would require.

Let’s look closer at Dubuque, not because it is any different from the rest of IBM USA but simply to characterize the company at a finer scale.

When IBM opened the Dubuque center the people of Iowa expected great things.  The center was staffed by a small number of US IBMers in management positions. Big Blue then brought over people from India for "training", then sent them back.  Few H1B visas were even required.

Every time IBM sent a batch of trainees back to India from Iowa they laid off US workers.  While Dubuque was led to believe they’d get an influx of highly-paid new residents, what the city actually received was a transient workforce of underpaid people -- workers that may well be invisible to local government.  It would be interesting to know how many permanent hires in Dubuque have been Iowa residents or graduates of Iowa universities?  How many workers spend less than a year in Dubuque?  Is Iowa seeing any benefit from the investment they made to open the IBM Dubuque center?

Whenever IBM has a big project they now have to bring in extra workers, usually from India.  I have been told they plan the arrivals over several days to a few weeks.  They route people through different airports.  They make sure there are never more than two or three workers coming on the same flight, effectively avoiding notice by Homeland Security.

Are any of these people paying FICA or US income taxes?  Good question. Why is IBM sneaking around? Better question.

Layoffs by any other Name

With hundreds of thousands of laid-off IT workers in the USA, why can’t American workers be hired for these positions? Because IBM doesn’t want US employees. Or, for that matter, European employees, though these are harder to jettison.

Layoffs at IBM are rarely due to job performance, though complaining will get you sacked. Big Blue tends to position these actions as job eliminations, but jobs aren’t usually eliminated, they are just relocated to GDF or GR locations staffed by cheaper workers. IBM manages to skirt the Worker Adjustment and Retraining Notification (WARN) Act requiring advance notification of layoffs or plant closings by structuring these resource actions to stay just below the numbers required to provide notifications at given locations. In this way IBM has managed to avoid the mainstream media and touts itself as a good corporate citizen while continuing to expect remaining employees to work 60-70 or more hours per week to keep up with the amount of work.

These draconian tactics might be justified if survival of the company or the best interests of the customer were involved, but they aren’t. It’s mainly about executive compensation. Meanwhile IBM’s work for customers is becoming increasingly shoddy. Contract terms such as vulnerability scanning, ID revalidations, and security implementations are routinely late or not done at all. Account teams are under continued pressure to meet revenue and cost targets regardless of how poorly the contracts were structured by the sales team. Each business sector has a target to move a certain percentage of their technical work to an offshore Global Resource (GR) or onshore Global Delivery Facility (GDF) as mentioned above.

IBM’s goal appears to be to have as few employees in the United States as possible, maximizing profit.  But doing so clearly hurts customer satisfaction.

Major IBM customers such as Amgen, the State of Texas, and most recently the Walt Disney Company have cut ties with IBM in favor of other providers. Many other customers are scaling back services they’re buying from IBM as the perceived value continues to drop. Customers are starting to realize that they can directly hire offshore companies such as TCS, Wipro, HCL and Satayam and book the savings directly instead of paying IBM top dollar for support and then seeing that support fulfilled from BRIC (Brazil, India, Russia and China) countries.

When IBM first started its big push to offshore technical work, the account teams were asked to make a list of reasons why customers’ work couldn’t be offshored, but were not allowed to use skills as a reason. That makes no sense in a rational organization but it makes perfect sense to IBM.

Reprinted with permission.

Also in this series: "The Downfall of IBM"; "It's a race to the bottom, and IBM is winning"; "How do we just fix IBM?; "IBM as at a tipping point"; "Today's IBM, rotten to the core"."

Photo Credits: A.S.Floro/Shutterstock (top); wendelit teodoro/360Fashion (Cringley -- below)

Robert X. Cringely has worked in and around the PC business for more than 30 years. His work has appeared in The New York Times, Newsweek, Forbes, Upside, Success, Worth, and many other magazines and newspapers. Most recently, Cringely was the host and writer of the Maryland Public Television documentary "The Tranformation Age: Surviving a Technology Revolution with Robert X. Cringely".