Global supply risks

Bleak Start to 2016 for Big Blue: Declining Revenues & Massive Reorg Likely Signal Another Round of Layoffs at IBM

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IBM recently reported its 15th straight quarter of year-on-year declining revenue. Although the company has taken several measures to correct this trend, many believe that another significant round of layoffs is imminent. Some believe that as many as 26% of employees could be terminated or laid off by the end of the month.

IBM authorities have rebutted these rumors by stating that these numbers are grossly inflated, though they did confirm that a significant budget of $600M was set aside for workforce rebalancing.

In case you haven’t heard yet, IBM is in the midst of its largest reorganization, codenamed Project Chrome. The company has decided to focus on areas of quick growth and cut down expenses at its traditional departments. It is investing in areas such as research, sales & delivery, systems, cloud, Watson, security, commerce and analytics. This, they claim, is not a signal of a company in distress but instead “is evidence that IBM continues to remix its skills to match where [they] see the best opportunities in the marketplace.”

IBM is not alone. Many large technology players are feeling significant pressure from digital disruption to improve their balance sheets by reorganizing and undergoing large layoffs. For example, after Dell acquired VMware, 800 jobs were slashed from the VMware workforce. Market analysts also expect other large players such as HP, Oracle, Cisco and Microsoft to follow suit.

Although IBM’s investment towards newer technologies will be beneficial to its customers in the long run, the impending job cuts and layoffs can be worrisome. Such announcements come with real and understandable concern for clients as it means losing key people from their existing projects. This could put their assignments in jeopardy and cause some level of delay in delivery as well.

An effective supplier risk management program can help you manage this type of situation effectively. Establish a free and forthcoming communication portal and use this channel to voice concerns and gain clarity. As and when the layoffs take place, ensure that key people are not removed from existing processes and pay careful attention to the quality of resources being subtracted from engagements. Include key personnel clauses into new contracts or renewals to ensure smooth delivery even in the event of engagement team turnover. Revisit business continuity plans and programs to ensure that they are robust and thoroughly tested to avoid service disruptions.