The world's largest IT services provider, International Business Machines Corp., better known as IBM, is set to embark on another major round of layoffs, with India slated to be a major beneficiary with many of these jobs being outsourced to this country.
IBM will cut about 5,000 jobs in the US, for over 4 percent of the company's workforce in the country, which totalled around 115,000 at the end of 2008. Reportedly, the reductions will mostly be in IBM's global services business, which includes outsourcing and consulting services. The global division accounts for about one-fifth of sales.
Some of the jobs are being eliminated because customers have ended contracts or the company has automated tasks. But employees say in many cases, they have been training IBM workers from India to do work that will now be moved overseas.
IBM had already cut at least 4,000 positions since January, joining technology bellwethers Microsoft Corp. and Intel Corp. in trimming payrolls to cope with the recession. US employers have eliminated more than 823,000 jobs since November and the jobless rate rose to 8.1 per cent last month, the highest in a quarter-century. (See: Intel follows AMD in cutting down operations, to fire 5,000 employees)
This latest round of cuts show that even companies that have so far navigated the global recession profitably are continuing to slash costs. In January, IBM reported $4.42 billion in quarterly profit.
Among other companies that are profitable, Microsoft Corp. announced plans for 5,000 layoffs earlier this year and Hewlett-Packard Co. is cutting some 25,000 people in the wake of its acquisition of Electronic Data Systems Corp., a rival of IBM's services business. (See: Microsoft pink-slips 5000 staff, despite profits / HP to lay off 24,600 in EDS integration)
IBM has been steadily building its work force in India and other locations while reducing the number of workers based in the US. Foreign workers accounted for 71 per cent of Big Blue's nearly 400,000 employees at the start of the year, up from about 65 per cent in 2006. It has bolstered its workforce in Brazil, Russia, India and China since 2007.
Almost two years ago, CEO Sam Palmisano said IBM probably would double sales in countries such as India, Brazil, China and Russia by 2010. Last year sales to those countries advanced 18 percent, with growth in India outpacing the other regions, according to regulatory filings.