IBM cuts its losses in Europe with EMEA restructuring plan

Customers could benefit from IBM’s restructuring, according to analyst firm Gartner. It said the vendor’s decision to shake up its services operations, which will lead to up to 13,000 redundancies worldwide, will make it more focused in the long-term.

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By  Peter Branton Published  May 15, 2005

Customers could benefit from IBM’s restructuring, according to analyst firm Gartner. It said the vendor’s decision to shake up its services operations, which will lead to up to 13,000 redundancies worldwide, will make it more focused in the long-term. Earlier this month, the IT giant announced that it is cutting jobs across EMEA, as part of a restructuring of its Europe, Middle East & Africa (EMEA) operations. The job cuts, which will mainly impact its operations in Western Europe, will be achieved through voluntary and involuntary redundancies, the vendor said. “Gartner believes that removing a significant part of IBM’s pan-European management structure is a strong, but prudent, move,” the research firm said in an online advisory. “According to IBM, the new structure will enable it to respond to more variable demand by moving front-line staff nearer to customers, to move more support and delivery capabilities into shared services or centres of excellence and to streamline management reporting. In effect, IBM is responding to soft, highly selective and business-driven customer demand in Europe by attempting to apply the principles of its own “on-demand” message,” the firm said. According to Gartner, IBM will replace its EMEA headquarters in Paris with two operating hubs, one in Zurich for north-eastern Europe and one in Madrid for south-western Europe. A spokesman for IBM Middle East declined to comment on how the restructuring will affect IBM Middle East’s reporting structure. However, the vendor has claimed that no redundancies are expected in its Middle East operations as a result of the changes. “Here we grew our business by double-digits, we over-achieved on all our targets... so our region is not touched by this,” said Takreem El-Tohamy, general manager IBM Middle East, Egypt & Pakistan. While IBM’s restructuring so far only applies to its EMEA operations, Gartner expects it to implement similar strategies in other regions, it said. IBM customers should look at all aspects of their relationship with the vendor, especially services and contract management, the analyst house said. Other analysts believe that IBM’s actions are likely to start a trend, with other firms expected to copy its actions and restructure their EMEA operations to drive efficiency, reduce costs and shorten time-to-market in key geographies. “In what sense is lumping together Europe, Middle East and Africa relevant in the modern world?” commented Ian Wesley, research director at Ovum. Separately, HP last week said just under 2000 employees have accepted voluntary severance packages in its Imaging and Printing Group (IPG), mainly located in the US. The computing giant said it is focusing its efforts on those areas where it sees the best opportunity.

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