IBM plans to cut about 20 percent of its European workforce with the heaviest blow to fall on technology jobs in the UK and Germany, as it prepares to roll out “NewCo,” the company told labor representatives in the European Union, according to Bloomberg. The job cuts will involve the loss of 20% of staff in the region.
Bloomberg reported that the 10,000 job cuts in Europe would be complete by mid-2021.
In a statement to Bloomberg, Big Blue pointed to “staffing decisions” to provide the “best support to our customers” in adopting an open hybrid cloud platform and AI capabilities.
“Our staffing decisions are made to provide the best support to our customers in adopting an open hybrid cloud platform and AI capabilities. We also continue to make significant investments in training and skills development for IBMers to best meet the needs of our customers.”
IBM reportedly told European labor reps in early November that it will cut jobs in Slovakia, Poland, Italy, and Belgium as well as the larger cuts in the UK and Germany. Hardest hit will be IBM’s legacy IT services business, which handles day-to-day infrastructure operations, such as managing client data centers and traditional information-technology support for installing, operating and repairing equipment.
The job cuts are thought to be an effort to streamline IBM’s systems integration business ahead of a spin-off CEO Arvind Krishna announced in October.
Last month, Big Blue announced it was splitting up the 109-year old company in order to better focus on its hybrid cloud business, which it sees as a $1 trillion market opportunity.
IBM will split off its IT infrastructure services unit, which is comprised of its managed infrastructure services other than hybrid cloud, into a new company by the end of next year. The new company, which is being called "NewCo" until a new brand is in place, provides technical support to more than 4,600 clients in 115 countries.
During IBM’s third quarter earnings call in late October, CFO James Kavanaugh told analysts that it planned to “streamline our business” ahead of the spin off in the fourth quarter, and pegged the restructuring costs at about $2.3 billion. The services spin-off will have revenue of $19 billion with more than 4,600 clients in 115 countries including more than 75 percent of the Fortune 100. He added: “The savings from these actions will be reinvested in areas like hybrid cloud, data and AI, security, and emerging technologies. With our focused, hybrid-cloud-platform strategy, and the increased investments starting now, we expect to drive sustainable mid-single-digit growth after the separation of NewCo is complete.”
With a $60 billion services backlog, IBM called NewCo the “world’s leading managed infrastructure services company.”
Once the spin-off is completed, IBM will move from a No. 1 ranking on the 2020 CRN Solution Provider 500 list of North America’s largest solution providers to No. 2 behind Accenture.
Layoffs Have Begun
"There are layoffs going on now - client execs, digital sales, and hearing tech sales next, as IBM expect the sellers to pickup doing demos and the technical parts with the customers, on the FULL portfolio!! – the inmates have taken over the asylum," according to a post two days ago on thelayoff.com in response to a question about whether layoffs were taking place.
Martin Wolf, president of martinwolf M&A Advisors of Walnut Creek, Calif., one of the top channel investment advisory dealmakers, said IBM “can’t cut enough.”
“They’ve had too many people for 30 years. It‘s been one gigantic layoff after another. So, hopefully, a new broom sweeps clean,” he said. “The answer for IBM is that they must have a simpler business model. So by spinning out assets and units, that’s a smart thing to do. They should have done it 30 years ago. They can’t cut enough.”
In May, The Wall Street Journal reported that IBM would be cutting thousands of employees across several sectors at IBM, including the Global Technology Services (GTS) division, which offers IT outsourcing.