For
employees of IBM India, once considered the jewel in the crown of Big
Blue, the coming weeks are expected to bring yet more layoffs and
soul-searching about the unsettled nature of working in the software
industry which has helped create a new middle in India over the past two
decades.
Across three of the biggest offices of IBM India in Bengaluru, anxious employees are scrambling to find new jobs in IT services industry or even new careers at online retailing firms, engineering or telecommunication companies. Layoffs are not new at IBM in India — they have been a feature for about a year as CEO Gini Rometty orchestrates a restructuring which she believes will help the 103 year-old company cope with the rapid changes in technology and business models.
"It's a complete opposite to the emotions we had when IBM gave stock options to all employees in June 2011," said Shekhar (he only gave his first name to protect his identity), a former IBM employee who now works at a Bengaluru security software startup.
From around 1.65 lakh employees on its payroll in 2011, IBM's India headcount is expected to slide to one lakh by March this year. Globally IBM and its units had 4.33 lakh employees at the end of 2011 compared to an estimated 4.3 lakh now, suggesting that the layoffs have been particularly severe in India.
Bleeding blue
IBM, whose 2014 revenue was $93 billion, has denied a report on Monday that it is about to fire around 1.1 lakh staff globally, but it acknowledged that the reductions will affect 'several thousand' employees. Last week, IBM said it was taking restructuring charges of $580 million, with one Wall Street analyst suggesting that could mean job cuts of just 8,000. ET spoke to at least a dozen people who were sacked by IBM India, apart from several company insiders, for this story. An IBM India spokeswoman had not responded to ET's query sent last week.
"Work from home at IBM has a completely new meaning now," said a source referring to the flexible work arrangement offered by IBM to nearly half of its employees.
For the software engineers who are leaving IBM, new opportunities are coming their way from the likes of rival Cognizant and India's biggest online retailer Flipkart. But it is not just engineers who are losing jobs — sales professionals across divisions are being laid off units are merged. According to a person familiar with the discussions, IBM's Integrated Technology Services (ITS) and Strategic Outsourcing units have significant overlaps, and with a proposal to merge these units, hundreds of sales specialists could lose their jobs.
Apollo and Chrome projects IBM, which has not seen its revenue grow since 2008, has launched two aggressive internal projects to trim its payroll. The first one, termed 'Apollo,' is aimed at employees from the level of junior programmer up to midmanagers. Unlike in the past when managers had to identify 'the bottom 5%' as part of annual pruning, the new norm is to identify 'the bottom 20%.'
The second one called 'Chrome' is aimed at senior executives, of whom are 150-160 in IBM India. "Around 40 of them could either get demoted or let go," said another person familiar with the company's thinking.
In some ways, IBM's efforts to trim its payroll and selectively hire people with specialized skills in new technologies underscores a tectonic shift in the global IT industry. And India's software outsourcing giants — Tata Consultancy Services, Infosys and Wipro — too are not immune to this shift. Indian IT companies only added 13,000 employees for every billion dollar of revenue in the 12 months to March 2014 as against 26,500 employees the year ago, according to Nasscom. The software and services industry in India employs 3 million workers.
As part of project Apollo, those with no skills in SMAC (Social, Mobile, Analytics and Cloud) or even analytics platform Watson, are being asked to go. According to people familiar with the development, the attrition rate at IBM is currently pegged at around 26%.
"IBM is shrinking workforces not just in India — 70% of costs in that economy are related to labor. That is grossly inefficient when you compare to modern factories or data centres," said Vinnie Mirchandani, a technology analyst and CEO of advisory firm Deal Architect.
"I am not sure IBM optimized its global delivery model. Many of the Indian vendors were disciplined by customers like GE to optimize that model.While IBM is laying off employees, it also creating new jobs those may be far fewer in number and not necessarily located in India.In areas like social marketing, security and mobile app development, IBM and other firms are developing talent pools in newer global regions and so are not as dependent on India," added Mirchandan
Across three of the biggest offices of IBM India in Bengaluru, anxious employees are scrambling to find new jobs in IT services industry or even new careers at online retailing firms, engineering or telecommunication companies. Layoffs are not new at IBM in India — they have been a feature for about a year as CEO Gini Rometty orchestrates a restructuring which she believes will help the 103 year-old company cope with the rapid changes in technology and business models.
"It's a complete opposite to the emotions we had when IBM gave stock options to all employees in June 2011," said Shekhar (he only gave his first name to protect his identity), a former IBM employee who now works at a Bengaluru security software startup.
From around 1.65 lakh employees on its payroll in 2011, IBM's India headcount is expected to slide to one lakh by March this year. Globally IBM and its units had 4.33 lakh employees at the end of 2011 compared to an estimated 4.3 lakh now, suggesting that the layoffs have been particularly severe in India.
Bleeding blue
IBM, whose 2014 revenue was $93 billion, has denied a report on Monday that it is about to fire around 1.1 lakh staff globally, but it acknowledged that the reductions will affect 'several thousand' employees. Last week, IBM said it was taking restructuring charges of $580 million, with one Wall Street analyst suggesting that could mean job cuts of just 8,000. ET spoke to at least a dozen people who were sacked by IBM India, apart from several company insiders, for this story. An IBM India spokeswoman had not responded to ET's query sent last week.
"Work from home at IBM has a completely new meaning now," said a source referring to the flexible work arrangement offered by IBM to nearly half of its employees.
For the software engineers who are leaving IBM, new opportunities are coming their way from the likes of rival Cognizant and India's biggest online retailer Flipkart. But it is not just engineers who are losing jobs — sales professionals across divisions are being laid off units are merged. According to a person familiar with the discussions, IBM's Integrated Technology Services (ITS) and Strategic Outsourcing units have significant overlaps, and with a proposal to merge these units, hundreds of sales specialists could lose their jobs.
Apollo and Chrome projects IBM, which has not seen its revenue grow since 2008, has launched two aggressive internal projects to trim its payroll. The first one, termed 'Apollo,' is aimed at employees from the level of junior programmer up to midmanagers. Unlike in the past when managers had to identify 'the bottom 5%' as part of annual pruning, the new norm is to identify 'the bottom 20%.'
The second one called 'Chrome' is aimed at senior executives, of whom are 150-160 in IBM India. "Around 40 of them could either get demoted or let go," said another person familiar with the company's thinking.
In some ways, IBM's efforts to trim its payroll and selectively hire people with specialized skills in new technologies underscores a tectonic shift in the global IT industry. And India's software outsourcing giants — Tata Consultancy Services, Infosys and Wipro — too are not immune to this shift. Indian IT companies only added 13,000 employees for every billion dollar of revenue in the 12 months to March 2014 as against 26,500 employees the year ago, according to Nasscom. The software and services industry in India employs 3 million workers.
As part of project Apollo, those with no skills in SMAC (Social, Mobile, Analytics and Cloud) or even analytics platform Watson, are being asked to go. According to people familiar with the development, the attrition rate at IBM is currently pegged at around 26%.
"IBM is shrinking workforces not just in India — 70% of costs in that economy are related to labor. That is grossly inefficient when you compare to modern factories or data centres," said Vinnie Mirchandani, a technology analyst and CEO of advisory firm Deal Architect.
"I am not sure IBM optimized its global delivery model. Many of the Indian vendors were disciplined by customers like GE to optimize that model.While IBM is laying off employees, it also creating new jobs those may be far fewer in number and not necessarily located in India.In areas like social marketing, security and mobile app development, IBM and other firms are developing talent pools in newer global regions and so are not as dependent on India," added Mirchandan
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