https://spectator.sme.sk/c/23314584/ibm-to-lay-off-hundreds-in-bratislava.html
7 replies (most recent on top)
Two things need to be addressed:
- The labour code requires IBM to pay up to 3 months worth of salary when firing ppl, depending on how long they have been employed. The severance package is at most additional 5 salaries, in case you're with the company for more than 20 years. Even the most senior employees got maximum of 8 salaries in total.
- On average, b8 roles earn 45k gross p.a. in Slovakia, now compare that to US employees and you'll see that the severance package is not such s big deal
What hurts is after 35yrs getting 3mon sev in US whereas other countries get based on service yrs. This article says 5 months plus 1mo for every 5yrs. So that would be 1yr of Salary. Most US older ppl would gladly retire if you offered them 1yr of salary like the old days of IBM but Ginny ended that!!
3yrb You have summarized the equation quite nicely. POK is manufacturing mainframe and large power. Otherwise manufacturing has moved to low cost Mexico to lower costs (Scale out power and storage). In looking at IBM’s revenue, the consistent weak sisters are scaleout product sets and their associated TSS costs. TSS is especially weak as they continue to shrink at 5-7% annually and have a very high labor content that can’t be automated. Look for some bean counter to finally persuade IBM to exit scaleout product sets and its associated TSS businesses or change their go to market strategy. The beauty of that decision is it dovetails nicely with IBM’s strategy of Enterprise/Hybrid cloud/SW modernization/LINUX. The odds of something getting announced in 2024 are very good
IBM has been using cost take-out for decades as a substitute for its inability to grow top-line revenue. The act has become stale..."near-shoring" and "off-shoring" are just codewords for "cheaper labor". After all the job cuts and division sales, how much fat is left on the carcass?
Any marketing and services that are left at this point will need to be well-compensated (no matter what geography), or they won't stay. That leaves hardware and software development along with manufacturing and distribution and various support services. It's the same story...there's not much room anymore for cheap and low-skilled labor, in any geography. IBM has to retain the experienced and skilled staff that it has left, which means it has to pay.
It won't be easy, that's for damn sure.
At least everyone (every country) is sharing the pain!
On the 1st Q earnings call, IBM committed to an extra 1 billion in cost take out in 2024. They also committed to a 2023 cost take out run rate (approx 4k of head count). That equates to an extra 12-18k worth of head count if the cost take out is all coming from labor. I suspect the near shore (less skilled more repetitive) jobs are taking more of the hits. Certainly IBM is also targeting on shore skills as AI has made certain jobs off shore friendly (yes that means India). My guess is 2-2.5K on shore jobs in NA. 2-2.5K on shore jobs in Western Europe. 1k on shore jobs in Asia. 5-10k jobs in near shore locations. I hope I’m wrong, but the math and executive statements all point to something like this. Good luck to all.
With all these layoffs in Eastern Europe and Latin America, is the nearshore strategy dead? Will IBM just go AI (All India)?