IBM layoffs affect services groups, impact on Canadian business unknown

IBM is cutting an unspecified number of jobs in the first significant staff reduction under new chief executive officer Arvind Krishna, but the impact on the Canadian workforce is unknown.

The Wall Street Journal said the cuts are likely in the thousands. IBM had 352,600 employees as of year-end 2019. An IBM Canada spokesperson told IT World Canada that the company reviews its workforce every year and that it does not break out the global locations for competitive reasons.

“IBM’s work in a highly competitive marketplace requires flexibility to constantly remix to high-value skills, and our workforce decisions are made in the long-term interests of our business,” according to an IBM statement.

A May 21 thread on the Facebook group Watching IBM pointed to multiple layoffs across several services divisions. Bloomberg said the cuts are in several units, including its Global Technology Services (GTS) division, which does IT outsourcing, as well as Watson’s artificial intelligence unit.

IBM in January, hinted it was planning changes at GTS to bolster its competitiveness. Those moves should deliver gross savings of almost $2 billion a year, chief financial officer James Kavanaugh told analysts at the time.

The Global Business Services segment, encompassing application development and cloud migration, was flat, while revenue declined by four per cent in Global Technology Services, according to IBM’s fourth-quarter earnings.

Roughly 60 per cent of IBM’s revenue comes from low-growth services. That needs to change, Dave Vellante, co-CEO and analyst at SiliconANGLE Media, wrote in a recent column.

“Services gives IBM world-class coverage and deep industry knowledge,” he wrote. “But services margins are low, and it has diseconomies of scale and compresses IBM’s revenue multiple and subsequent valuation. To secure IBM’s future, the company must dramatically grow other parts of its business.”

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Alex Coop
Alex Coop
Former Editorial Director for IT World Canada and its sister publications.

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