IBM Layoffs Continue as Transformation Rages On

Reports of IBM layoffs of up to thousands of employees continue as the company seeks to transition to support cloud, analytics and cognitive workloads.

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As IBM goes about its efforts to transform itself to focus on strategic imperatives such as cloud computing, analytics and cognitive technology, the company also is quietly getting rid of an increasing number of employees.

According to various reports, most prominently, the Watching IBM page on Facebook, IBM has let thousands of employees go this year—primarily in what the company calls "resource actions," or RAs—in March and again in May.

Reports on the number of employees to be cut vary, with some saying up to 14,000 and others saying 18,000 to 25,000 jobs are on the line. And some reports indicate that as much as one-third of IBM's U.S. workforce could be laid off.

Many enterprises continually cycle current employees out and new employees in, as part of adapting to market needs and changing skills, said Charles King, principal analyst at Pund-IT, and a close watcher of IBM.

"The bigger the company, the larger number of workers who could be affected," King said. "But eliminating one-third of the jobs in a company like IBM—which currently has about 378,000 employees—would render huge swaths of the company essentially ineffective and unmanageable."

IBM is keeping mum on the number of job cuts there will be this year. However, in a statement, the company said: "IBM is aggressively transforming its business to lead in a new era of cognitive and cloud computing. To this end, IBM currently has more than 25,000 open positions, many in these key skills areas. If we meet our hiring targets, we expect our employee numbers to be roughly the same at year-end as they were in 2015."

That is in keeping with the information shared by Martin Schroeter, IBM's CFO, during the company's most recent earnings call in April, where he discussed IBM's first quarter 2016 financial results. That quarter marked the 16th straight quarter that IBM's revenue has dipped as it continues to make its transformation.

"As we transform our business and move into new areas, we need to transform our workforce—not only the types of skills, but how we operate," Schroeter said during the earnings call. "This quarter we took significant actions to transform our workforce and shift our skills base to new areas, and to improve our structure primarily outside the U.S."

This resulted in a pre-tax charge of just under $1.5 billion, Schroeter said.

He also indicated that some of the charge was used to take care of areas where IBM has been dealing with "underutilization,” but the vast majority is to shift and rebalance skills.

Cognitive computing, a new field of focus for IBM, requires new and different skills, particularly areas such as Watson Health and Watson Internet of Things. Over the last year, IBM added more than 6,000 resources in Watson Health, and added more than 1,000 security experts.

"These are specialized skills in highly competitive areas," Schroeter said. "So this is not about reducing our capacity; this is about transforming our workforce. We started the year with just under 380,000 people."

Schroeter reiterated that although IBM has "people leaving the business," the company also is hiring aggressively and has tens of thousands of open positions such that its employee base could be the same at the end of this year as it was at the end of 2015.