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by Vault Consulting Editors | March 26, 2009

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What do you get when you cross Merrill Lynch (or any bank, for that matter) with Wipro? Today, the answer would be IBM, which is said to be planning a workforce reduction to the tune of 4,000 … and that's just this round. With today as the projected date that the axe will fall, insiders indicate that the global business services unit (yep, that's where most of the consultants live) is sure to be hit particularly hard, as well as the global application services group. "Carnage," I believe, is the word one Vault poster uses as he goes on to detail the groups he sees as targets.

Plain old layoffs are one thing, but the added dimension to the IBM story is that for the past few years, it's been shipping loads of jobs overseas, no doubt to reduce overhead cost (this is where the Wipro side of the equation comes in). So, as the company has been boosting its employment figures in India, Brazil and other outsourcing hotspots, it's been conspicuously reducing its domestic workforce. The firm laid off about 4,600 in January, and there's word of more to come. At this point, 71 percent of IBM's employees are foreign workers, amounting to about 75,000 in India alone.

But with the tempo of business these days making outsourcing ever more tempting, this is not a trend that's likely to slow any time soon. Especially with the impending demise of Satyam, not only is IBM looking to cut costs in the States, but it's also looking to buck up the competition against the big Indian outsourcers. Another Vault user comments that, especially in its technology services group, IBM is "competing on cost … It's their only value proposition," which inevitably necessitates a shift to cheaper labor.

That said, IBM is one of a few companies that's posted revenue growth from the depths of the global recession ($4.42 billion in the past quarter). So its overall strategy of cutting costs in some places (the US, in this case) and strengthening other revenue-driving practices seems to be paying off, at least so far. Not to be overlooked, many current IBM employees feel positive about the company's overall outlook. Says one, "Management, through cost reduction, is allowing our company to do well in its earnings—it's good for shareholders. Additionally our CEO is very good about setting business trends and generating demand. We are well positioned to take advantage of growth opportunities in other high-growth countries given scale and vision."

Sure, IBM's recent moves might be good for shareholders and the ultimate survival of the company, but that's certainly not the whole picture. To put it bluntly, "When IBM workers see jobs being shifted offshore, it's like stabbing them in the back," said Lee Conrad, a former IBM employee who is an organizer for the Communication Workers of America, which is trying to unionize IBM.

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