IBM to cut 1500 staff and send jobs offshore
Affected staff said between 1200 and 1500 local jobs are being made redundant this year in several waves. These figures rival the minimum 1200 jobs that Ford announced it would cut when it exits Australia in 2016.
IBM refused to confirm the figure or deny it is sending Australian jobs offshore, saying that for competitive reasons it does not discuss the details of staffing plans. Fairfax Media understands the jobs that are sent offshore would continue to service Australian clients.
Local executives were told of the redundancies in a March teleconference, one source said, ahead of a global restructuring plan announced in April. Executives were told by the company's New York office they needed to cut about 10 per cent of the local workforce this year following disappointing global first-quarter results. The company is estimated to employ between 12,000 and 14,000 staff in Australia.
The redundancies add to communication technology job losses in Australia due to offshoring and cuts by other giants such as HP. Technology workers in banking and other large industries have reported being fired but only after training people in India, China or the Philippines or workers on 457 visas to do their jobs.
IBRS analyst Alan Hansell, who specialises in advising on the outsourcing of IT and the IT skills market, said the cuts mean there will be fewer IT jobs for Australians.
"It's another reason why it's important to review the 457 visa program," Mr Hansell said. "Why bring people in on 457 visas to do IT work when Australian IT jobs are being shed?"
He said the breadth of IBM's services meant the tech giant was "probably finding difficulty in managing them and keeping them profitable".
He said he wouldn't be surprised if New Zealand ended up benefiting the most from the cuts. This was because of the country's cheaper real estate, lower mandatory superannuation and labour rates.
New Zealand also had better English language proficiency than other countries in the region, which he said would help drive productivity when talking with clients.
The restructuring will reportedly cost IBM $US1 billion worldwide. At least 1300 people have been fired in the US, according to employee group Alliance@IBM.
IBM's total global workforce was 434,246 as of December 31. The cuts were estimated by analysts to affect about 2 per cent of its employees, 6000 and 8000 people globally, although Australia appears to have been hit harder.
Frequently Asked Questions about this Article…
According to sources in the article, IBM Australia is cutting up to 1,500 local staff this year in several waves, with many roles reportedly being sent offshore to Asia and New Zealand. IBM declined to confirm or deny the number, saying it does not discuss staffing details for competitive reasons.
The article says IBM employs an estimated 12,000 to 14,000 people in Australia, and local executives were told to cut about 10% of the local workforce this year as part of a global restructuring plan.
Analysts estimated global cuts would affect roughly 2% of IBM’s staff — about 6,000 to 8,000 people — while the company’s total global workforce was reported as 434,246 as of December 31. Employee groups also reported at least 1,300 people were fired in the US.
The article links the cuts to a global restructuring announced after disappointing first‑quarter results. An industry analyst quoted in the piece said IBM’s broad range of services may be difficult to manage profitably, prompting the company to reduce costs and reorganise parts of its business.
Yes — Fairfax Media understood that the jobs being sent offshore would continue to service Australian clients, even though the work would be performed from other countries in the region.
The article notes the redundancies add to broader offshoring trends in Australia’s tech sector, and an IBRS analyst said the cuts mean fewer IT jobs for Australians. He also suggested the situation is another reason to review the 457 visa program, since some local workers have reported being replaced after training offshore staff or visa holders.
An analyst in the article said New Zealand could benefit most from the cuts because of cheaper real estate, lower mandatory superannuation and labour rates, and relatively strong English proficiency — factors that can help drive productivity when servicing clients.
Investors should note the restructuring reportedly carries a roughly US$1 billion cost worldwide and follows disappointing quarterly results. Keep an eye on IBM’s official announcements, upcoming quarterly results and commentary on cost‑savings or margin improvements to assess whether the restructuring is likely to improve profitability over time.
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