IBM receives $78 million in stimulus dollars - where are the jobs ?

According to the web site recovery dot gov, IBM has so far received approximately $78 million in stimulus dollars from the economic recovery bill that was passed last year. The site is a great source to see where the money is going, how much has been deployed and how many jobs were created. According to recovery dot gov, the number of IBM jobs created by this huge unfisuion of $78 million is (drumroll please)...... 35 jobs. That would be a cost of $2,2 million per job created.

The reality is that IBM is not creating jobs in the US. They are destroying them, at the rate of 10,000 in 2009 and 3,000 so far in 2010. The reality is that IBM is increasing staff in foreign countries. While IBM US employment declined in 2009, total global employment has increased. This means that IBM is creating jobs - just not in the United States.

I challenge my government to use whatever oversight they may have and question IBM about who is actually performing the work related to those $78 million in government contracts. If even one of those 35 jobs is being done by a foreign worker, then I ask, as a taxpaying citizen, that the contracts be canceled and all funds awarded to IBM be returned to the government. The contracts should then be awarded to companies that actually create jobs in the United States.

IBM: #5 on the "Biggest Business Blunders of 2009" List

Business Blunders of the Year
Introducing the B-List: The 77 stupidest managerial moves and worst business blunders of 2009.
By Adam Horowitz and David Jacobson

Stupid. Managerial. Move. I could not have said it more simply nor better.

IBM is Number 5 on the list.

This refers to the "Project Match" program. I think this is widely recognized both inside and outside IBM as a blunder. Some have used harsher language. I called it a "cold slap in the face" on two of my radio interviews. Some call it an insult. Some call it irony. All (except IBM management) call it just plain wrong.

Comments were spot on. Robert Salomon at Seeking Alpha called it "funny" and "from the humor category." It's hardly humorous if you were one of those laid off.

This from the bnet site itself, by "tramky":

Re: 5) IBM layoffs. This is the worst of them all because of what it shows of corporate America, and is representative of the important things that are wrong with this country today. One of the wrong things is corporate America, which has no loyalty to anything or anyone. More American corporations are comprised of low-life creeps and liars who care about nothing.My stomach turns over when I get near the office building of an American corporation. The last one I left was that of Worldcom after they filed bankruptcy and tossed thousands of employees and billions of dollars down the sewer.This IBM story is a really bad one, sickening in fact. Makes one want to puke. A formerly great company--decades ago--reduced to pond scum.

Creeps. Liars. Scum. Hey, that may not be language I would use, but then who am I to argue ?

100 Best Companies to work for

The latest list of the top 100 companies to work for is out today. IBM is once again missing from the list. Gee. What a surprise (*snark*).

The last time IBM made the list was back in 2003, when they ranked #38.

Tech job cuts hit 4-year high

NEW YORK (CNNMoney.com) -- Planned job cuts at tech companies rose in 2009 for the second straight year, hitting the highest level in four years, according to a report released Tuesday.

Outplacement firm Challenger, Gray & Christmas Inc. reported that tech sector employers announced 174,629 job cuts in 2009. That's a 12.3% increase from cuts announced in 2008, and the highest total since 2005.

This is just the tip of the iceberg. Many large and small tech companies do not even announce job cuts. The 175,000 was just announced job cuts. IBM never announced, but they cut 10,000 jobs in 2009. And, small companies are excluded from the WARN laws, so they don't even need to announce.

IBM Layoffs in the U.S. not necessary

IBM has been shifting jobs offshore. Management argues that jobs are being "rebalanced" or shifted to areas where business is expanding - where the customers are. So, one would assume that IBM is losing customers in the United States while increasing customers in BRIC countries. But, how do we determine where IBM customers are ? I found a clue in one of the footnotes in one of IBM's annual statements:

"Revenues are attributed to countries based on location of client and are for continuing operations"

Aha ! All we have to do is look at revenues to determine where the customers are ! IBM does not report revenues by country - only by region. They report three regions:

1. Americas
2. Europe/Africa
3. Asia

Asia includes India and China, the two countries where IBM is hiring the most. IBM hired about 30,000 people in Asia so far this year (2009) while laying off 10,000 in the U.S. - so for every worker laid off here, three are hired in Asia. That is a huge jobs shift to Asia. It's been happening every year. (It should be noted that Latin American IBM employment is growing also - 7,000 hired so far in 2009.) So one would expect a tremendous growth of revenues (customers) in Asia. Well, let's look at revenues.

IBM revenues have been growing every year since 2004. The overall revenue numbers are:

2004 $85.6 billion
2005 $88.3 billion
2006 $91.4 billion
2007 $98.8 billion
2008 $103.6 billion

Nice ! 2009 is expected to be a decline in revenues to $96 billion, but due to cost cutting earnings are expected to hit another record. But, I'd like to look at revenues only here since IBM claims there is a tie between revenue location and customer location. Total IBM global employment has grown every year (including this year !) with the total employment numbers by years as follows:

2004 325,000
2005 326,000
2006 350,000
2007 385,000
2008 395,000

So, revenue dollars increased 21% from 2004 to 2008, and employment numbers increased 21% from 2004 to 2008 also. Consistent. Overall revenues per employee have remained constant. Yet, earnings have grown at a greater pace than revenue growth. Why ? Cost cutting.

But jobs are being destroyed in the US and transferred to the BRIC countries. So one would expect an equal shift in revenues away from the U.S. and towards these developing countries. So let's look at IBM revenues from Asia as a percent of overall revenues:

2004 20.9 %
2005 20.1 %
2006 19.2 %
2007 19.7 %
2008 20.4%

Say what what ? Revenues in Asia are pretty much flat at almost exactly 1/5 of total revenues each year. As a matter of fact, revenues have stayed about the same year to year, percentage wise, from 2004 to present: about 20% of revenues come from Asia, about 42% of revenues come from Americas, and about 34% come from Europe/Middle East/Africa. It does not vary by more than 1% each year.

So revenues are not shifting. Therefore, customers are not shifting. Yet employment is. Hmmm. So let's look at the number of IBM employees in the U.S., and how much it is declining.

2004 140,000
2005 134,000
2006 127,000
2007 121,000
2008 115,000

The number of IBM employees in the United States has decreased 18% between 2004 and 2008. The decline averages about 6,000 jobs lost per year. In 2009, the decline is 10,000 (so far). Meanwhile, IBM employment in India increased 326% (23,000 in 2004 and 98,000 in 2008) over the same time period.

Customers are not moving to Asia. Revenues are not increasing in Asia. But jobs are shifting to Asia. That is because U.S. work to support U.S. customers is being done by Asian workers. Next time you call the IBM U.S. Help Desk, ask the person where they are located. Also, IBM internal operations are shifting to Asia. IBM Global Procurement is now based in Beijing. All purchasing for U.S. operations is done by a buyer in India. IBM U.S. payroll is now done in Hungary. This is purely a salary arbitrage play. IBM is saving money in salaries by moving jobs to lower cost countries. Shame on IBM.

Indiana cancels $1.3 billion IBM contract

For a brief time a few years ago, I worked on an outsourcing ("strategic sourcing") project for an IBM client, NiSource. It was not a good experience for me. I was taken off the project after less than three months. It was the low point of my otherwise rewarding and successful 11-year career at IBM.

NiSource is a well established, well run Mid-Atlantic utility company. We were an IBM team of about 20 people who advised NiSource on how they can improve their business operations, mainly sourcing (what used to simply be called procurement) of services. I saw several nuggets of good ideas, but overall the project was disorganized, lacked focus and lacked staff level client support. The contract was signed without an agreed scope of work. Most importantly, IBM had no specific experience in running, no less advising, a utility company, and brought very few new ideas to the table. I knew that it was destined to fail. And it did.

So it is no surprise to me that I have heard since, either from contacts inside IBM or in the news, about IBM contracts being canceled. Chase. Texas. Sprint.

Today is another in the series.

"Gov. Mitch Daniels’ (Indiana) canceled the state’s $1.3 billion welfare modernization contract with IBM Corp. in October after months of complaints and rising error rates. The state’s error rate was more than 19.5 percent in July. The move came after hours of testimony critical of the IBM contract. "

This is a big deal. In the past, IBM and the client have gone out of their way to say that contracts are canceled NOT because of fault by IBM, rather as a change in business strategy. In this case, IBM is accused of poor quality. IBM's reputation is damaged. Not that IBM would ask me, but the problem at IBM is five parts as I see it:

1. These projects are typically understaffed (afterall, the goal is lower costs).
2. The staff that IBM does provide is comprised of a few talented people who are supported by dimwits from BRIC countries.
3. The client company staff is not cooperative, since they believe they will all soon be laid off (and will).
4. The projects lack focus. The sales teams fail to develop accurate scopes of work.
5. Last and most important, IBM mid to upper level management lacks ability.

Shame on IBM

Off to the Wall of Shame with IBM and New York City

JOB DESTRUCTION NEWSLETTER No. 2033 -- 6/30/2009

"New York City hired IBM for a large contract. IBM in turn outsourced parts of the work to Mumbai, India......"

Do not let IBM spokespeople fool you into believing that IBM is transferring jobs to the BRIC (Brazil, Russia, India, China) countries because that is where the work is. No. The work is here, the clients are here, in the United States. The work is being sent to foreign countries. When the work needs to be done here, IBM is physically importing cheap labor by the use of H1B visas.

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