IBM on Wednesday said it has mostly completed the sale of its commodity server business to Lenovo Group for $2.1 billion. Up to 7,000 Big Blue workers will transfer to the Chinese company, with about 1,000 coming from U.S. operations. It's the latest in a series of moves that has seen IBM pare its American workforce, and it will bring the company’s domestic headcount to about half of what it was during 1990s tech boom.
IBM’s employs about 430,000 workers worldwide. It stopped providing country-specific figures after 2009, but a group that is looking to unionize the tech giant maintains that, after several years of annual layoffs, IBM will have less than 80,000 workers stateside following the Lenovo sale.
Another divestiture that could close this month would further slash IBM’s American workforce. The company is close to a deal to sell its chip manufacturing business to GlobalFoundries, a semiconductor maker owned by the emirate of Abu Dhabi. That could see another 7,000 workers, mostly in Vermont and upstate New York, exit the company and would put IBM’s U.S. headcount closer to 70,000 if pro-union estimates are accurate.
In 2000, before the .com-fueled tech bubble burst, IBM maintained 153,587 workers in the U.S. It was also the last year in which it saw a year-over-year increase in its domestic headcount.
IBM since the mid-1990s has been aggressively expanding operations in low-cost countries and regions like Brazil, Eastern Europe and Asia—most notably in India, where tech salaries are less than half of what prevails stateside. Estimates put IBM’s headcount on the subcontinent as high as 150,000—or roughly double the number of workers it employs in America. That’s up from about 50,000 a decade ago.
“The notion of IBM as an iconic American tech company is passé,” said veteran industry watcher Rob Enderle, principal analyst at The Enderle Group. “It remains iconic but this is a company that can shift resources globally at a moment’s notice.”
Enderle said new technologies like the cloud—an IT architecture in which business data and software is stored online—make the physical distance between customer and service provider almost irrelevant. That has spurred numerous other tech companies in addition to IBM to bolster their use of offshore resources. Microsoft, Apple and Facebook are among the household names that have ramped up overseas hiring.
IBM executives have defended the company’s paring of U.S. jobs and overseas expansion by noting that it needs to control costs while building a presence in the world’s hottest growth markets. In the most recent second quarter, IBM reported revenues from Asia-Pacific markets of $5.3 billion, more than a fifth of its total Q2 sales of $23.9 billion.
Critics say IBM is merely engaged in labor arbitrage, seeking skilled tech workers at the lowest possible cost regardless of location and impact on local communities. “This is about shifting work and cutting costs,” said Lee Conrad, a spokesman for Alliance at IBM, the pro-union group. “IBM will never again be the big powerhouse in the U.S. that it once was for employment.”
An IBM spokesman dismissed the claim, calling the Alliance “an ad hoc group that doesn’t represent the workforce at IBM.”