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IBM raising axe for 'significant workforce balancing in Europe', says staffer rep council

GTS to shoulder third of cuts, with UK and DACH hit hardest

The Global Technology Services division at IBM will bear the brunt of the latest round of bloodletting in Europe, according to a letter from the organisation that helps impacted employees navigate redundancy.

In a letter to staff mid-May, seen by The Register, the European Works Council (EWC) warned of "significant workforce balancing" across the region.

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"This action will be largely voluntary," the note stated, adding: "The Chairman made it clear that no backfill will be possible; as a result, the EWC foresees a further increase in workload for the remaining IBMers."

The exact number of volunteers being sought in Europe was not detailed in the document, though IBM admitted late last week that globally around 0.5 per cent of its employee base, some 1,700 heads, will be eased out the door. Watson Health, Cloud and GTS were said to be the major areas forcing through the change.

The EWC letter stated: "The total planned impact of the current headcount reduction is comparable to the last downsizing in the first quarter of 2018. The impact varies by country and can on average be described best as a low single-digit reduction."

In Q1 last year, IBM put more than 1,100 staff in GTS at risk of redundancy, and more than 500 exited the business in that round.

Operations in the UK and Ireland, along with DACH countries (Germany, Austria and Switzerland), are where the "current action" will be "felt mostly", accounting each for "one-fifth of the total reduction across Europe, followed by IBM Nordics".

The EWC said it was "most concerned" by the search for volunteers to take redundancy in "strategic growth areas" including Cloud Platform, Cloud Data Platform, Cognitive Applications and security.

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Members noted "that the Cloud and Cognitive Software revenue of IBM in Europe in the first quarter was not in line with the corporate model. However, if it is the company's ambition to become the leading Cloud and Cognitive Software provider, we would expect staff numbers in these strategic areas to increase accordingly."

In the past five years, it is the outsourcing portion of IBM − GTS − that has seen a furious amount of cost-cutting as clients moved more workloads to the cloud and signed fewer traditional outsourcing contracts.

IBM developed a 60/20/20 ratio classification for GTS: 60 per cent of staff operating from offshore locations, one-fifth working in near shore and the final fifth onshore. El Reg thought Big Blue was near to achieving those ratios a year ago in the UK business.

EWC said in the letter: "More than a third of the total European reduction target is aimed at GTS. This is most significantly felt in the Nordic countries, especially Norway. While the EWC membership has been advised that no actions will be taken without prior customer agreement, we are deeply concerned about the unprecedented impact this restructuring will have on the delivery of contracted services, Net Promoter Scores and the employees affected. The EWC calls upon IBM senior management to revisit the proposed reduction targets to ensure the continuity of local services levels."

Other areas that are "significantly impacted" include support functions such as HR, CIO, asset management, as well as Cognitive Enterprise Services and Enterprise Operations & Services. A further breakdown was requested by the employee reps.

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EWC said IBM was not including "innovative and constructive approaches" to redundancies, including leave of absence, bridges-to-retirement and internal redeployment.

IBM management is being urged to "continue to investigate, apply and advertise subcontractor replacement were possible as one of the alternative approaches", the letter noted.

The redundancies are scheduled to be concluded by the close of Q2, meaning a fairly rapid turnaround. This is assuming IBM gets enough volunteers to leave as a compulsory programme will take longer.

"The EWC believes that financial engineering and US accounting rules should never hinder sustainable solutions, create time constraints or otherwise disadvantage employees being in scope of this resource action," the letter added.

The council has requested face-to-face meetings with IBM, it said.

Europe was IBM's best performing region in fiscal '18 , growing 1 per cent to $37bn, and it was the only geographic area that grew in Q1, a point not lost on the EWC.

The Register has asked IBM to comment. ®

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