IBM layoffs target services, marketing employees

IBM has laid off an undisclosed number of employees across multiple divisions, with the company's services business taking the biggest hit.

The reason for the cuts, the first under the leadership of newly appointed CEO Arvind Krishna, is to make the company more agile, IBM said in a statement.

Arvind Krishna

"IBM works in a highly competitive marketplace and requires flexibility to constantly remix high-value skills, and our workforce decisions are made in the long-term interests of our business," the company stated.

The latest round of IBM layoffs come in the context of the coronavirus pandemic, which has forced some of IBM's larger corporate accounts to hold back on planned purchases of core hardware and software products over the next couple of quarters. Also cited as a reason, according to industry observers: IBM's services organization, Global Technology Services (GTS), has temporarily halted work on existing projects still under contract.

"The services group is affected largely because a lot of eight- and 10-year projects are coming to an end," said one consultant familiar with the company's plans. "That group, as well as marketing, are being affected because customers have scaled back budgets impacted by the coronavirus."

A number of those people in the services and marketing organizations are approaching retirement age and are willingly opting out, the consultant noted.

"With some of these contracts ending, many of the account experts that get laid off are hired back as consultants. That way, they are off the books," he said. "This is typically the way IBM likes to handle these situations."

IBM indicated its GTS division was having some difficulty when last month it took a $900 million charge against earnings as a way to cover costs associated with restructuring the group.

IBM officials did not respond to queries about the layoffs.