IBM Layoffs 2009-2018: Outsourcing, Modernization of Workforce Key Reasons for Big Blue Job Cuts

IBM layoffs
iStock.com/Wolterk

International Business Machines Corp. (NYSE:IBM) was once (and perhaps still is) the dream employer of the 1980s. An IBM employee is elevated to a lifetime white-collar status in exchange for unwavering loyalty. But “Big Blue” hasn’t kept up with its stiff global competition. IBM layoffs are now a result of a shrinking core business and a surplus of experienced employees.

IBM has a global workforce that’s over 400,000 strong. But years of of declining revenue have forced IBM to engage in cost-cutting measures. Some 20,000 American IBM employees were laid off in the last five years alone.

IBM never publicly discloses how many employees are affected by “workforce rebalancing” measures, but the company’s annual U.S. Securities and Exchange Commission (SEC) reports reveal the amount of money that goes into severance and other layoff expenses.

Wall Street analyst Toni Sacconaghi estimated in 2014 that IBM pays $70,000 when it shows an employee the door.

Advertisement

IBM Layoff Trend in 2018 an Indication of Age Bias?

In a detailed investigative report on the IBM layoffs in 2018, ProPublica revealed that the IT enterprise had a large workforce of experienced and aging employees with substantial salaries.

The company addressed the seniority issue by trading experience-enhanced skilled workers with younger, less-experienced workers who have cloud skills and other up-to-date computing skills. Additionally, more jobs from the U.S. were moved overseas to lower-wage countries. Currently, the New York-headquartered company has its largest workforce in India, with 130,000 employees in that country.

Since 2013, an estimated 60% of the IBM job cuts were employees above the age of 40. Given the company’s recent trends, it comes as no surprise that IBM trimmed its “Watson,” cloud, and sales staff. Further, they were planning to cut 10,000 more in the “Global Technology Services” (GTS) unit in the March 2018 round of job cuts.

IBM hasn’t confirmed the exact number of employees laid off this year, but the company’s workforce rebalancing expenses in 2018 were already at $563.0 million for the first half of the year.

IBM Job Purge of 2017

IBM’s 2017 round of layoffs was reportedly one of the the tech giant’s largest ones in recent years. Though, with the multiple rounds of IBM layoffs this year, 2018 could cross that threshold.

The company’s workforce rebalancing expenses in 2017 totaled $199.0 million. That amount tripled in the first half of 2018.

Sales units in the U.S. were hit the hardest in the 2017 layoffs. Employees with stellar sales records and decades of experience within the company were laid off.

It should be noted that none of these figures come close to the 1993 purge, IBM’s biggest round of layoffs in 20 years. The age of personal computers struck IBM hard and 60,000 employees lost their jobs at that time.

In 2016, IBM Fired as Many as It Hired 

Big Blue seems to break its workforce reduction record every year. The 2017 round of IBM layoffs was larger than the 2016 layoffs, which were massive too.

In the first half of 2016, more than 5,000 IBM workers in the U.S. were let go when jobs were moved to India and Costa Rica. The eventual number of employees who were axed that year is much higher, considering the multiple rounds of IBM job cuts. The workforce rebalancing expenses incurred in 2016 were massive, at more than $1.0 billion.

Current IBM CEO Ginni Rometty touted the fact that IBM had added around 70,000 people to its payroll in 2015. Yet, studies revealed that the company lost as many employees by the end of the year as it hired, including people who quit and those who were laid off.

IBM Project Apollo 2014: An Expensive Shift in Resources

IBM’s workforce rebalancing expenses at the end of 2015 were $587.0 million, which was barely half of what the company spent on layoffs in 2014 and 2016.

An estimated 13,000 jobs were lost in the internally code-named “Project Apollo” in 2014. The workforce rebalancing cost in 2014 was planned to be around $1.0 billion.

It’s not accurate to say that all of those jobs were eliminated though. IBM sold several business units and the employees moved with it. For instance, around 7,500 jobs in 2014 went from IBM to Lenovo Group Limited (OTCMKTS:LNVGY, HKG:0992).

IBM Employees Faced the Brunt of Declining Revenue in 2012 and 2013

IBM stopped reporting the geographical breakdown of its employees since 2009. Watchdog sites, however, provided an estimate by tracking paperwork of axed workers.

The years 2012 and 2013 didn’t see any improvements in IBM’s revenue. In 2012, IBM recorded the fourth-highest number of layoffs by any company that year after it laid off 9,000 workers worldwide. That accounted for 2.1% of IBM’s global headcount.

In 2013, the company recorded its worst quarter in eight years. As a result, Big Blue began shrinking its workforce radically.

The 2013 round of layoffs was an escalation from the company’s $803.0 million spent on workforce rebalancing in 2012. According to one watchdog site, there were an estimated 1,790 IBM job cuts in the U.S. and Canada by March of that year.

According to one report, the company cut 2,286 jobs across several units in one round of layoffs in 2013.  That would amount to around $1.0 billion worth of workforce rebalancing costs worldwide.

IBM Moved Jobs Out of U.S. After 2008

IBM laid off more than 3,700 employees in 2007. That year, the IBM U.S. workforce was 121,000.

After 2008, IBM started significantly downsizing in the United States and outsourcing jobs offshore. At the end of of 2008, IBM had 115,000 workers in the country. That number dwindled to around 90,000 in the the following year.

In 2009, 4,600 North American IBM employees were laid off and the company planned to give pink slips to another 5,000 workers that year. The total cost of workforce rebalancing in 2009 was approximately $400.0 million.

IBM then cut approximately 1,600 jobs in the U.S. by March 2010. The company had worldwide workforce rebalancing expenses of $641.0 million in 2010 and $440.0 million in 2011.

The Looming Threat of More IBM Layoffs

IBM doesn’t seem to give sufficient reasons to its laid-off employees for their dismissals. Nonetheless, it’s believed that performance is not considered while reducing the workforce.

Watchdog groups comprised of former IBM employees claim that the company goes around age-bias regulations when it gets rid of older employees.

So why do employees who have dedicated decades to IBM fear the layoff axe swinging in their direction?

The problem of failing to modernize hit IBM in 1993. Since then, legacy technology skills haven’t performed well for IBM, while competitors like Amazon.com, Inc. (NASDAQ:AMZN), Facebook, Inc. (NASDAQ:FB), and Google—aka Alphabet Inc (NASDAQ:GOOG) have been leading in innovation.

Now IBM focuses on hiring workers with cognitive and cloud computing skills to tap into new millennial-centric areas.

Even though IBM wants to convince the U.S. government that it’s not reducing jobs in America, the evidence is to the contrary. But the bigger issue of possible age discrimination is also a topic to be addressed.

Sources

Cutting ‘Old Heads’ at IBM,” ProPublica, March 22, 2018.

IBM Employees Fear Company Will Begin Up To 13,000 Layoffs TomorrowBusiness Insider, February 25, 2014.

Delving into IBM’s Layoff Numbers,” Dice, June 14, 2013.

The 21 Largest Mass Layoffs Of The Year,” Business Insider, September 6, 2012.

IBM layoffs blamed on offshoring,” Computerworld, March 2, 2010.

IBM lays off another 1,500 workers,” The Sydney Morning Herald, May 31, 2007.

IBM cuts more than 1,600 US jobs,” The Register, March 2, 2010.

Form 10,” U.S. Securities and Exchange Commission, last accessed November 2, 2018.

Report of Financials: International Business Machines Corporation and Subsidiary Companies,” U.S. Securities and Exchange Commission, last accessed November 2, 2018.

Advertisement

Advertisement