IT Weekly Middle East Newsletter 15th May 2005

Flabby, overweight gym instructors don’t tend to prosper. So, perhaps it’s not surprising that IBM has found itself having to shed some surplus poundage as it attempts to convince its business customers that it can make their operations run a bit leaner. Unfortunately, the poundage IBM is having to lose is some of its own people

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By  Peter Branton Published  May 15, 2005

Getting ME back into shape|~||~||~|Flabby, overweight gym instructors don’t tend to prosper. So, perhaps it’s not surprising that IBM has found itself having to shed some surplus poundage as it attempts to convince its business customers that it can make their operations run a bit leaner. Unfortunately, the poundage IBM is having to lose is some of its own people: pound of flesh indeed. The news this month that IBM is to lose between 10,000 and 13,000 of its staff has led to much hand wringing by union bosses in Europe, where most of the job losses will fall. Job cuts have however been on the cards for some time, at least since IBM announced disappointing results for its first fiscal quarter and warned that it needed “sizable restructuring” to improve performance. The problem for Big Blue is that it’s just a bit too, well big. While it has been busy trying to persuade its customers that it can provide high-value business performance transformation services, its own business performance has struggled recently. For a company that wants to be seen as at the cutting-edge of both computer technology and business practices, it was working with a management structure that has been growing since the Second World War: country managers reporting into a large regional headquarters just had the end result of too many layers of bureaucracy. While European performance was still seen as good, that didn’t matter so much, after all, if the numbers are being made then you don’t look at making wholesale changes, why rock the boat? Now, with Western Europe seen as a low-growth market, IBM has been forced to look at what it can throw overboard to reduce weight. While axing staff is always a tough call to make, the company can claim that it is just doing what makes sense: it is shifting employees to where the business is, which means growth areas in Eastern Europe, Asia and, lest we forget, here in the Middle East as well. The alternative for IBM would be to see smaller, more nimble rivals from countries such as India steal a greater chunk of its business. IBM isn’t alone in having to take such steps to protect a business many had previously seen as safe. HP has recently made nearly 2,000 redundancies in its Imaging and Printing Group (IPG), the business unit that delivers the lion’s share of its profits (to be fair to HP, the redundancies were achieved through a voluntary plan; IBM is looking at both voluntary and involuntary redundancies). HP however, needs to look at tougher competition from leaner outfits, most notably Dell, and reduce costs where it can. The harsh reality is that globally, we are still in the fourth year of a tough economic period with IT expenditure still struggling along. That means that there is tremendous competitive pressure, especially pricing pressure, on vendors. While it has arguably never been a better time to be an IT buyer, with big corporations able to secure good deals from their suppliers, for IT staff, times are still uncertain. One further factor has been pinpointed by analysts as being behind IBM’s decision to restructure its EMEA operations and that is the whole idea of maintaining such a structure in the first place. For some, lumping together Europe, the Middle East and Africa as one entity doesn’t really make sense anymore in a global economy. Certainly, the idea of having a regional management structure located thousands of miles away from customers doesn’t make much sense for business, or indeed for the region. Perhaps that will change in the future, where IBM has led in this way, others may yet follow. Good news? We’ll have to wait and see but for the Middle East, it may yet be better to take the ME out of EMEA. ||**||

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