Mad Dog 21/21: Nervous Nellies
June 19, 2017 Hesh Wiener
IBM has about 375,000 employees. Five years ago, the company’s payroll covered roughly 430,000 employees, some 55,000 or around 15 percent more than today’s estimates. IBM didn’t simply trim its workforce. Rather, IBM dismissed tens of thousands but also hired many others. The corporate headcount numbers reflect the net impact. Meanwhile, in every single quarter since 2012, IBM’s revenue declined compared to the year earlier period. So, to cut costs, IBM may continue to pare its payroll. Many IBM employees are worried. Yet they may be the lucky ones: They still have their jobs.
The potential for sweeping layoffs at IBM probably weighs most heavily on employees in IBM’s home country, the USA. In America, IBM enjoys enormous freedom to reshape its workforce without running into too may restrictive regulations. In addition, IBM employees in America at every level are among the highest paid people on the company’s roster. American wages stand in sharp contrast to IBM’s pay levels in India, where the company has built a formidable force of technical talent happy to work for less than their typical American counterparts. IBM’s Indian employees are also generally paid and less than personnel in Canada, Japan, and Western Europe, but compared to others in India with comparable skills, they do very well.
IBM’s American employees are nervous nellies, and they seem to be willing to talk about their worries. These concerns amplified by Internet media such as the Facebook page that carries comments from present and more often former IBM employees. That web page is a remnant of a failed effort to unionize Big Blue by the Communications Workers of America.
These web postings seem to come largely from people dropped by IBM in one of the downsizing moves the company calls Resource Actions, or RAs, although some of the comments appear to be from people still on the IBM payroll. If there’s a common sentiment among the contributors it is disappointment. The posters clearly believed an IBM career offered a lot of security along with a bundle of policies and practices that made Big Blue a superb place to obtain a solid financial and social foundation. And it clearly used to be the case that a landing job at IBM was a terrific and lasting accomplishment. That enormous sense of opportunity within IBM is still the case in India and, soon, if IBM does what its executives have promised shareholders, it will be the situation in parts of Africa, too, where IBM believes an important part of its future lies.
Still, IBM employees the world over are understandably concerned about job security, even in places where law and culture make it more difficult for IBM to shed employees than in the USA. IBMers outside the USA may have somewhat greater job security, and they may be more reluctant to voice their concerns and gripes than Americans, but nobody working for IBM these days can take their position for granted.
IBM’s achievements in India, today the powerhouse country for its services operations, have boosted the prospects of Big Blue’s South Asian competitors, too. This tide has made all the ships rise. In India, the oldest and arguably most powerful of IBM’s services rivals is Tata, which fifty years ago was largely committed to working with Burroughs computers rather than IBM systems but long since learned to serve a diverse customer base. On its heels are such firms as Infosys and Wipro, accompanied by more than a half dozen other substantial outfits. Even though IBM must share the services opportunity with its rivals, the aggregate result is a force that preserves the IBM mainframe as the leading large scale platform for business and government information processing the world over.
Investors may wish that IBM wasn’t working up such a sweat to turn a profit in the services business, but the highly competitive market helps IBM’s largest customers get good value. If IBM still had the kind of pricing power in computer services it enjoyed during the Gerstner era, it would very likely be able to report better margins, but it would also suffer severe attrition of its base. Users would undoubtedly feel that they were paying more for services on IBM platforms than they would on alternative systems. They would be tempted to move, most often to alternatives based on X86 architecture.
Attrition is currently a defining characteristic of the IBM proprietary systems customer base, but it is not inevitable. IBM may feel some pain as its customers move work elsewhere, but this trend could be slowed or even reversed if IBM figures out how to make System z mainframes and Power Systems in the cloud provide the high value available from services based on other platforms. In cloud computing, IBM is imitating its X86-oriented rivals using industry standard hardware and systems software, but it is not providing economically attractive cloud support for legacy mainframe and Power environments. Perhaps it is impossible for anyone to make mainframe or Power iron deliver the kind of price/performance it takes to win business in the cloud, but it is too soon for any observer to simply write off IBM’s prospects. As it stands, IBM management is strong on sales but not so strong in invention, and it has not come up with ways to reinvent cloud computing in a form that better serves mainframe customers.
IBM has a similar problem in the Power architecture markets for AIX, IBM i, and Linux-on-Power services. It has talked about finding ways to give Power a substantial and permanent home in the cloud, but it hasn’t put up and lately it seems to have shut up. If IBM allows its Power prowess in the cloud to be restricted to specialty market segments, such as high performance computing, it will end up with a noteworthy and prestigious business but not necessary a very large one.
It might seem that IBM’s woes could yield opportunities for customers in search of mainframe and Power talent. One can imagine after reading the Facebook IBM gripe page that users of IBM’s propriety systems would have an easy time picking off skilled IBM employees or picking up former IBM employees to staff their glass house operations. But that might not be the case. Most IBMers still on the payroll seem to prefer remaining with Big Blue. For the most part, they don’t seem to be inclined to join end user companies or to go off on their own and work as consultants serving IBM shops. They seem to prefer living with a measure of fear and insecurity as long as they can pack an IBM business card. Basically, they love IBM notwithstanding the company’s flaws. And the employees IBM has shed may consider working for users, but they may have a hard time finding employment arrangements they like; they are not at all used to chasing down work in the job market.
Still, there are signs that plenty of opportunities are close at hand. IBM’s technical employees, no matter how well paid, are billed out at very high rates when they are part of Big Blue’s services operations. These people could charge a lot more for their time yet save their clients big money if only they could connect directly with user organizations. It would seem that quite a few career opportunities might be available to IBMers (and former IBMers) in the USA, Canada, and Europe. By contrast, an IBM systems expert in Bangalore couldn’t very easily get a direct offer from, say, a distant Wells Fargo. But that could change.
There is no reason technical personnel could not participate in what is called the gig economy if only there was an Uber (or a Lyft if you prefer) for mainframes, an Uber for AIX, and an Uber for IBM i. There are a number of business models that might be used as a basis for a technical TaskRabbit. And there certainly are plenty of IBM-oriented technical folk who might join the labor pool if a coordinating organization figured out how to provide an attractive, practical structure that was comfortable for systems personnel and end user organizations alike.
The user outfits that would be most interested in taking advantage of a gig talent pool wouldn’t necessarily be the giants of finance that tend to buy services only from other strong companies. Rather, the potential customers for a mainframe gig service or a Power gig service might most often be outfits that have learned how to engage with smaller suppliers and with individuals when their in-house talent needs supplemental help. Social media might provide a foundation from which to launch geek gig go-getters into new orbits. What is lacking at the moment is not talent or opportunity but imagination. But these are creative times in computing, and it wouldn’t take very many entrepreneurial IT services startups to create a new career ecosystem for people with IBM systems expertise.