Silver lining for channel in IBM layoffs?

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Silver lining for channel in IBM layoffs?

Reacting to reports IBM has begun laying off as many as 15,000 employees as part of a $1 billion "workforce rebalancing" effort, IBM business partners say changes at Big Blue could be their gain.

Locally, the vendor is said to be cutting hundreds of jobs, both as part of last year's Project Mercury and also following the sale of its System x division to Lenovo. 
 
Some 7,500 staff are moving to Lenovo under the deal; the exact size of the System x division is unknown. 
 
IBM confirmed to CRN US that it's laying off an undisclosed number of its 431,212 employees. The layoffs have been anticipated since last month, when IBM reported it would take a US$1 billion “workforce rebalancing charge” in the first quarter of 2014. 
 
But job cut specifics are hard to come by.
 
In a statement to CRN US, IBM spokesperson Doug Shelton said, "We have been very transparent in reporting our intent to restructure. IBM continues to rebalance its workforce to meet the changing requirements of its clients." 
 
Shelton declined to share the extent of the layoffs.
 
Locally, The Australian is reporting job cuts as high as 500.
 
IBM stated the company "continues to rebalance its workforce to meet the changing requirements of its clients, and to pioneer new, high value segments of the IT industry. To that end, IBM is positioning itself to lead in areas such as Cloud, Analytics and Cognitive Computing and investing in these priority areas."
 
The statement continues that "IBM’s total workforce has remained stable over the past three years, and IBM now employs more than 400,000 people worldwide."

Some IBM partners have told CRN they are optimistic that any potential changes at IBM could be an opportunity to work more closely with the vendor.

One partner seeing positive signs for partners is managing director at IBM partner Sun Data, Kon Kakanis. While Kakanis said it wasn't easy to predict whether any changes at IBM might mean more work for partners, he said one outcome might be more opportunities to get close to some of IBM's larger customers.

"If you look at the trend over the last several years, named account lists are getting smaller. And a higher percentage of vendor account lists go through the channel. And this change continues that trend,"  Kakanis told CRN.

Kakanis said that while partners find it generally hard to get onto big vendor's named account lists, that is changing. "I've seen some indications of it," he said. " I've seen a change in behaviour from IBM."

Also upbeat about business with IBM is CEO of Southern Cross Computer Systems Mike Sakalas, who argues there is a "clear opportunity" to work closer with the vendor.

"From our standpoint we have such a good capability around IBM, if there is a reduction in the workforce - and we don't know if that's the case - that just means they are going to have to leverage their key partners further. Which for companies like us is fantastic."

Sakalas viewed IBM's stated push to focus on cloud, analytics and cognitive computing as a positive step into "higher value" territory, compared with a lower level commodity business. The question is which pieces IBM will invest in internally, and which they will require partners to invest in.

"For us it is a better chance to get closer to IBM. I can't answer for every IBM partner, but if you embrace the IBM portfolio there's a good chance you're embracing the software, services and cloud."

Also seeing increasing opportunities with Big Blue is Advent One managing director Graeme Clark. While he would not speculate on what, if any, changes IBM might be making within their business, he agreed that if IBM were to reduce the amount of business they do directly with customers, there could be an upside. "If IBM were to do that I would expect that yes it would mean more business for partners," he said.

Clark said IBM had a strong strategy for partners to be a key part of their route to market. "We've seen that get stronger over time," he said.

IBM's positioning when it comes to the cloud and pioneering areas like their new $1 billion Watson unit is a reminder partners need to stay agile, said Telsyte senior analyst Rodney Gedda.

"The key message is they need to find that balance, they need to be agile themselves. They can’t rely on IBM supporting one technology endlessly."

He said there is an opportunity for partners to work with IBM in areas like mobile application development, integration work, high value areas like mainframes and P series, and blue sky areas like Watson and artificial intelligence.

"I think the company is by and large committed to channel partners. I don't see that changing anytime. I think there's a good opportunity for partners to bash on IBM's door and see if there's any opportunity in emerging areas."

Layoffs reported

Sources tell CRN US that the layoffs will disproportionately impact IBM's hardware-centric Systems and Technology Group. CNET is reporting that nearly 25 percent in the Systems and Technology Group is on the chopping block.

IBM reported its revenues dropped from US$29.30 billion a year ago to US$27.70 billion in its most recent fiscal quarter. That marked the fourth straight quarterly sales decline for the vendor.

IBM's System and Technology Group, which sells mainframes, servers, storage and other hardware, saw revenue drop more than 26 percent to US$4.26 billion during the quarter.
 
"Job cuts started Thursday. We began getting reports in the AM about IBM sweeping job cuts across the U.S. Every division within IBM is feeling the impact from software, global services, and IBM's Systems and Technology group," said Lee Conrad, national co-ordinator for Alliance@IBM, an organisation run by the Communications Workers of America union that has long tried to organize IBM employees.
 
Conrad said he has received layoff reports from Arizona, Iowa, Minnesota, New York, and North Carolina. Conrad said layoffs could total 15,000, a figure he based on a report by an analyst at Bernstein Research in New York City that projected IBM's $1 billion "workforce rebalancing charge" translated to between 10,000 to 15,000 layoffs.
 
Vermont's CBS affiliate WCAX reported that more than 140 IBM employees will be laid off from the company's Essex Junction plant. Alliance@IBM says as many as 15 were laid off at IBM's Endicott, NY offices. Internationally, Alliance@IBM reported that 1,500 IBM employees were let go in Brazil, 600 in Argentina, 480 in France, and 430 in Italy.
 
IBM's struggles come at a time of major upheavals in the server industry as more OEMs, partners, and companies rely less on hardware and more on the cloud and cloud services.
 
Dell in October finished a protracted fight to become a private company in a $24.9 billion leveraged buyout to refocus itself on the enterprise and move away from its traditional PC business. IBM, meanwhile, just agreed to sell its x86 server business to Lenovo in a $2.3 billion deal that has been expected for nearly a year.
 
IBM's Shelton said in an email that the workforce rebalancing is an attempt to position "itself to lead in areas such as cloud, analytics and cognitive computing." To that end, just as IBM sells off its x86 low-end server business, the company has committed $1 billion to commercialize its Watson supercomputer technology. It also spent $1.2 billion to expand its global cloud footprint expanding the number of data centers for it recently acquired SoftLayer cloud platform.
 
IBM says it has 3,000 job openings related to cloud, nanotech, and "other growth areas in the US."
 

 

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