Layoff numbers not as bad as they look

From the constant drip of tech industry layoff announcements, you'd think huge numbers of IT workers would be out on the street. And certainly Cisco, Dell, Hewlett-Packard, IBM, Intel, Oracle, SAP, Sun, and others have announced thousands of layoffs. But the numbers they report don't reflect actual people losing their jobs, so the real tally of tech workers who have found themselves jobless is significantly smaller than you'd think.

"I honestly do not think the tech sector is in as bad a shape as it might appear," says Frank Scavo, managing partner at Strativa, a technology management consulting firm.

"IT executives have been quite conservative in their IT spending growth over the past several years. And when the economy took a downturn last year, they were pretty quick to make cuts."

The grim initial picture

To be clear: The economy is bleak, and tech vendors are taking necessary action.

"IT vendors are protecting themselves against what most now assume will be a weak market throughout much of 2009, with IT spending cutbacks spreading to other sectors like software applications and network infrastructure," explains IDC analyst Stephen Minton.

Indeed, last month saw a raft of layoff plans like no other in the portion of the tech industry that supplies business IT. Microsoft said it will reduce its workforce by 5,000, Intel will cut 6,000, Sun said an ongoing worker reduction could stretch toward 6,000, SAP revealed intentions to ratchet down its total headcount by 3,000, Oracle axed 500, and even IBM, which reported positive earnings, confirmed layoffs.

Although Big Blue did not provide an exact number, a union Web site for IBM employees put that at about 4,200 and reported rumors that it could soar as high as 16,000. What's more, Dell warned in December that it would cut as many as 8,900 employees worldwide.

Late last week, Cisco Systems CEO John Chambers said the networking giant may eliminate 1,500 to 2,000 jobs, a move that Chambers said he hopes would enable Cisco to avoid larger layoffs like other tech stalwarts were forced to put into practice.

So from these announcements from just the major tech vendors, that's as many as 35,600 jobs lost, not counting the remainder of the 16,000 rumored layoffs at IBM or the 24,600 people Hewlett-Packard said last year that it would let go as part of its EDS acquisition.

Estimates elsewhere range from 125,000 to 200,000, but they include HP's layoffs from last year plus consumer-oriented tech vendors and telcos, such as AT&T, Sprint-Nextel, and Yahoo.

The real layoff numbers revealed

But InfoWorld's count of actual layoffs -- people who have lost real jobs -- from these business IT tech vendors is nowhere near 35,000. Instead, it's about 9,600. That's not good news for those who've lost their jobs, but it's not the kind of number that should cause a panic.

Why the disconnect? Because announced layoffs aren't actual layoffs. "It's smoke and mirrors," says Natalie Petouhoff, a senior analyst at Forrester Research, "to tell shareholders they're doing what they need to do."

The announced numbers include vacant positions and planned positions, so eliminating them doesn't actually result in anyone fired. And the announced numbers include layoffs that may occur later on.

For example, in Microsoft's case, on the day it announced layoffs, Microsoft actually shed about 1,400 employees.

The rest of the 5,000, it said, would come during the next 18 months. "Microsoft might be able to reduce headcount by that number in the next year and a half simply by not hiring in certain divisions," says Neil MacDonald, an analyst with Gartner.

Sun followed a similar tack when it said last November that it was reducing jobs. Then, in January the company started that process by cutting 1,300 people -- a far cry from the 6,000 job losses the company offered originally.

IBM, for its part, was stingy with headcount details, but the union site Alliance@IBM put that number at 4,200. Intel said it would lay off employees as it closes four plants around the globe and said that some of the 6,000 people will be offered new jobs in other facilities rather than cut loose entirely. Thus far, Intel has not publicly revealed how many jobs have been eliminated; instead it said the cuts will come throughout the rest of this year.

Dell, meanwhile, advanced its restructuring in early January by saying it would move some manufacturing out of Limerick, Ireland, and lay off 1,900 workers there beginning this month. Rumors have been swirling that Oracle will slash up to 8,000 people, though the Wall Street Journal reported that the apps vendor has cut 500 in North America thus far (Oracle has yet to disclose any specific numbers).

And reports indicate that SAP has let go 300 to date.

All of these actual layoffs adds up to about 9,600.

Future remains murky, but hopeful

Of course, the current 9,600 statistic is sure to rise. But the reality is still far better than the 35,000 or more figures that the series of layoff announcements would indicate.

And no doubt, everyone hopes that the actual cuts now, coupled with a hoped-for turnaround in the economy later this year, will mean those potential future cost won't be needed, or at least not to the same degree. "Nobody is happy to be making these cuts in IT.

The hope is that current layoffs and spending reductions will enable organizations to ride out 2009," says IDC's Minton.

"Those tech providers that have costs under control now should be in good shape to profit from the recovery next year," agrees Strativa's Scavo.

InfoWorld