back to article IBM asks contractors to take a pay cut

IBM is not just banning the hire of new contractors and telling existing contractors they won't get new gigs: now it is telling some current contractors they will have to take a pay cut. Multiple IBM contractors in Australia have contacted The Register to say IBM has told them their rates will be cut, by ten per cent or more. …

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Boffin

So...

When Rometty sat in w Trump and pledged to keep people employed here in the US she was talking out her arse.

The larger issue is that IBM never really learned their lesson. You can't keep cutting people and costs and that something is going to give. Now you have it. This is clearly a decision made by a senior manager and their bean counters who are on the hot seat and have no clue on how to turn things around.

IBM is still slowly sinking and they will end up being yet another Unisys

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Re: So...

Senior manager indeed! Only that type of "person" can smile at such a hot pile of crap such as...

"... shifting its service delivery model to be heavily weighted to providing services with our dedicated employee workforce. We believe this will help IBM accelerate the benefits of cognitive technology services for our clients around the world."

It's just piled on there, real, real HIGH. I guess it's still tethered to Earth...slightly.

FYI, I don't believe Rometty is a real person. She might be an out of date pleasure model for politicians. She clearly fails the Voigt-Kampff test with any other human "interactions".

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Re: So...

A fare on the Titanic looks like a better bet.

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Anonymous Coward

Re: So...

I have met Gini and can assure you she was never an in-date pleasure model for politicians.

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Boffin

@Back Door ... Re: So...

By senior manager, I mean 3rd tier exec or higher in each region all under a directive from the chief bean counter to cut costs.

W.R.T shifting service model to use IBM dedicated employees... that means that they will use the offshore staff that they have been hiring all along. Note that clients see the cheaper labor being shipped in and will either immediately demand the contract to be renegotiated, threaten to sue, or will wait until the contract is up for renegotiation and will lower the boom on IBM further reducing the payments for services.

Rometty is real. I've actually met her at an EBU event many, many moons ago. She's in a bad place because those surrounding her don't know life outside IBM and can't think for themselves. So they fall back on the same old tricks that Sam used... only there's nothing left to cut.

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Re: @Back Door ... So...

I know a few IBM lifers, and they are all afraid of trying to move outside the company. They realize a lot of the culture they are used to won't fit well anywhere else.

IBM even has it's own internal Resume/CV style that doesn't work well outside the company.

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Ever heard of contract breach?

You can't have it both ways IBM... The whole reason companies rely on external contractors is "company security": when you don't need them then you can more or less dispose of them (depending on the contract) but there are certain areas where you cannot go.

A contract is basically a (legal) agreement in which both parties agreed that x amount of work would be performed for y amount of pay. You can't just change the deal and expect people to roll over. Because if this is how things worked then the contractors themselves would also be able to do the same thing: "Gee IBM, I think you're not paying me enough anymore and I now demand 10% salary increase. For the same pay of course, and the duration of the contract". Yet that's not the way it works because that's not what you agreed on.

Of course this is also assuming that there are no loopholes within those contracts.

Sure, it's a shame that things aren't going too well, but shouldn't you have thought about that beforehand? You can't have it both ways though: no employee obligations (contract can be terminated at any time) and still apply control over their payment? Sounds like foul trade to me.

Look... If a company gets into trouble and asks this from their employees then I think its definitely something to respect and consider. As an employee you also have a certain job security (at least in some countries). But as a contractor? No way! Business is business, and that's not what you agreed on.

I hope this backfires on them.

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Re: Ever heard of contract breach?

Not sure about Aus, but in the UK there'll be a term in every contractor's contract giving right to terminate at any time. Once you have that in place, anything can be done.

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Re: Ever heard of contract breach?

I assume the deal is 'agree to this or your contract won't be renewed' (or you'll be disposed of as mentioned).

'I am altering the deal; pray I do not alter it any further'

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Re: Ever heard of contract breach?

Not sure about Aus, but in the UK there'll be a term in every contractor's contract giving right to terminate at any time.

That is pretty typical in Australia as well.

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Anonymous Coward

Re: Ever heard of contract breach?

I've hired many 000's of contractors whilst at IBM.

The contracts are asymmetric, IBM can fire you at any time, the contractor doesn't have that right. What IBM would do is say, take a new contract with a pay cut OR we'll just fire you in a weeks time.

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Re: Ever heard of contract breach?

Thats odd - who would want to work for Rotten Blue under those circumstances. All my companies contacts are 2 weeks notice each side.

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Re: Ever heard of contract breach?

That's a real shame, when I worked as a contract worker a few years ago my contracts always required the client to pay me out if they wanted to cancel. That is, pay the entire amount owned on the contract if they want to cancel, of course no one did.

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Anonymous Coward

Re: Ever heard of contract breach?

.. The whole reason companies rely on external contractors is "company security": when you don't need them then you can more or less dispose of them ...

A contract is basically a (legal) agreement in which both parties agreed that x amount of work would be performed for y amount of pay. You can't just change the deal and expect people to roll over.

Exactly, IBM terminates their contract and offers them a new one for 10% less.

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Boffin

@Shell_user Re: Ever heard of contract breach?

Ever you ever read any of the contracts IBM has you sign?

(Yes, I have. And I've also written service contracts (SOWs) for IBM ...)

There are always out clauses and early termination clauses. IBM is notorious for having clauses which are trivial to bust, however, they will scare the uninitiated.

The worst case is that you have a 30 day out clause. So if you don't agree to a cut, they will notify you that your last day of service is X and you're to train up your replacement. (Not said, after you leave, if the replacement can't do the task, IBM will blame your inability to train your replacement as to why he or she failed.)

Some times the period is less. That clause is there to also protect you so you have an exit plan if SHTF things happen.

As to this backfiring on them... it will. IBM is in a no win situation. They subcontract to skilled people who can do the work because they lack the skills internally. Now you're out, they increase risk, create a customer sat issue, and the cost savings are negligible.

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Re: Ever heard of contract breach?

And clauses like that are in place here too.

Why would you sub to IBM?

For the money or to gain experience.

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Anonymous Coward

Re: Ever heard of contract breach?

I'm not about to dig out the paperwork I had with IBM (through one of their spin-off staffing firms) but I'm certain that I wasn't guaranteed a given amount of pay; only an hourly rate. I went through 4-5 furloughs during my last year of work with them only working 15 days on some months. Unless there was an ``emergency''.

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Anonymous Coward

Re: Ever heard of contract breach?

I hope this backfires on them.

Their dumbass plans backfire so much it sounds like a machine gun.

I got let go shortly after my 1-year time, and I *know* the contract with the customer was already seriously behind even when our group of contractors was still there. Letting us go can only have put it further behind, and the contract was coming up for renewal. How much you wanna bet that customer isn't an IBM customer much longer. And being an ITAR customer meant IBM couldn't readily "offshore".

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Anonymous Coward

Re: Ever heard of contract breach?

I just figure I'd give IBM exactly as much notice as they've ever given me. Which means I would tell them at 5PM on Friday that I was starting a new job on Monday.

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Re: Ever heard of contract breach?

Exactly, IBM terminates their contract and offers them a new one for 10% less.

They don't terminate contracts, they "cancel the purchase order".

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Anonymous Coward

A friend...

...who is a contractor in the UK, has twice had his contract cancelled with one days notice (through no fault of his own). In one case the project was cancelled and in the other I think he was exposing too many shortcomings in the (dysfunctional) organisation. Standard UK contracts seem to give employers the power to do this.

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Fuzz testing

Since you Simon zeroed in on that word again I think I'm thinking what you're thinking, that the absurdity would have been even more transparent if they'd said "... accelerate the benefits of cognitive rational technology services for our clients around the world."

Or intelligent, or beneficial. Actually any of the other words that managers might actually understand would serve also. As it is re: management 'cognitive' is a foreign word to them, almost best defined as "what you ain't."

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I don't see how this ends well for IBM...

Who ends up with IBM's business? HPE, Oracle, or someone else?

I'm not saying IBM is going out of business, but someone is going to pick up a lot of their clients...

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Anonymous Coward

Who?

Well HPE is continually getting rid of headcount. Oracle is as well according to a friend in Texas.

The ONLY people increasing their headcount are the likes of TATA, NIIT and other Indian bodyshoppers/sweatshops who promise the earth and usuall fail to deliver.

Boy, am I glad I retired when I did.

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Anonymous Coward

Who ends up with IBM's business?

Well, in some cases work gets brought back in house when clients realise that they can do it cheaper themselves. How do I know ? Well, my employer recruited me and my colleagues specifically to replace their IBM team - they looked at the costs and measured the quality and realised it was cheaper to do the work in house.

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Re: Who ends up with IBM's business?

they looked at the costs and measured the quality and realised it was cheaper to do the work in house

It usually is. The outsourcers win the contract on the basis of promised savings, the customer signs after lots of vendor-to-vendor bid comparisons, yet carefully not asking any questions about the vendor's average labour rate, their overheads, contract set-up costs, current margin, balance sheet capital and return on capital, and investor commitments for margin growth. A few scant years later the customer is paying far more than they did in house, for a worse service.

That is the problem with professional procurement functions and finance teams. They're very good at comparing the price of apples with apples. Unfortunately they never consider that next year you might need a pear, or the consequences of agreeing a price for the apples is below the cost to the seller.

Outsourcing works when you want a pure commodity service that won't vary much, you're not fussed by the delivery standard, and you're equally not fussed by the price you end up paying.

Interestingly, this isn't just ITO and BPO. Big companies often can't procure commodity outsource deals competently. Big, multi-national companies I've worked for have been repeatedly screwed on catering and cleaning, because the same rules apply: The winner bids a price well below any sustainable margin, and then has to build up to that level, either by "variations" or by hiding other profit streams. In those commodity examples, the commonest way of squeezing out profit is by making sure that the contract is labour and materials - in which case the vendor either directly hikes up the prices, or more commonly negotiates bulk discounts with their own materials suppliers that are taken centrally, and don't appear on the site invoices that the client companies see.

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Anonymous Coward

"Someone" isn't just going to pick up "Clients". "Someone" has already raided IBM for Technical Hardware Staff. A bunch of them, in the USA, to be exact. Customer's certainly are not happy about that. Senior Managers, don't care. Pretty soon, there will be more Team Leads and Senior Managers than Technical Staff to provide Technical Support. That won't work out well, for IBM...

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Anonymous Coward

Re: Who?

"Well HPE is continually getting rid of headcount." Really? That calls into question why so many IBM Technical Staffers are escaping to HPE's Storage Unit. Wonder how long they will last, there?

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Anonymous Coward

It seems like a mixture of groups.

- The Indian body shops who are offering the same category of services at cut rate prices.

- Insourcing has become popular as the big outsourcing contracts often fail to deliver on the huge cost takeouts they promise

- Cloud computing. Many, not all, of the low level admin tasks can be largely automated with a public cloud provider. Especially if you use a PaaS as opposed to IaaS.

- Some combination. For instance, cloud and then insourcing the relatively smaller staff as it isn't a huge cost to bear and improves agility of the organization. I think this option is bound to be the most popular over time. It is kind of crazy that companies with these billion dollar outsourcing contracts haven't gone to Google or AWS and just said 'here is what we do with outsourcing providers, tell us how we can do this, or a some portion of this contract, better, faster, cheaper with cloud.' It's not like there should be any internal politics with those contracts... as they are done by third parties anyway. I think may of these companies with outsourcing don't even have the internal expertise to source a new solution anymore though.

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Anonymous Coward

look on the bright side...

...somebody is going to buy their shares and take control of IBM. That's when the money will be made.

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Who ends up with IBM's business? HPE, Oracle, or someone else?

I'm not saying IBM is going out of business, but someone is going to pick up a lot of their clients...

NTT America is expanding their operations. The business will end up going to the less obvious players, and those players won't be wedded to particular HW/SW platforms either.

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Happy

Re: Who?

Not long, from personal experience.

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Anonymous Coward

A lesson in Corporate Economics 101

* Gut the company, get your multi-million dollar bonus and then leave... Let the 'lifers and temps' live with the fallout after... I worked for these f*cks once. But the state of the tech industry overall is a joke.

* Its all about whining about 'we just can't get the material', and at the same time all the material is being sh1t-canned so that entire divisions can be moved to low-income countries.

* Dear CEO's & Snr Execs in general, there are systems that take time and intelligence and familiarity to learn along with top training. You can't just outsource all of that, or you end up getting gutting, by clients and hackers and ultimately investors (Warren Buffet etc).

* And once all the good and irreplaceable developers have walked away, they won't ever return. In fact they'll quite enjoy watching you rot...

===========================

http://www.cnbc.com/2017/05/05/ibm-shareholders-criticize-rometty-salary.html

https://www.bloomberg.com/news/articles/2017-04-24/ibm-says-ceo-pay-is-33-million-others-say-it-is-far-higher

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FAIL

Not a new management process...

We've seen it before. Get rid of all the grunts and anyone below management. Everyone in management gets nice fat bonuses for "reducing costs". Suddenly (seems like only management will be surprised) revenue dries up as there's no one doing the actual work. Company goes down the tube and is broken up at fire sail prices. Management grabs all they can from the sales and then moves on to another company because of their great reputation. Rinse and repeat at the next company.

I guess they don't teach managers that worker bees are the backbone of any company? And without them doing what they do, there will be nothing to sell? A pox on all them.

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Re: Not a new management process...

Yes all horribly familiar,.yet another example of "imbecile with an MBA" or i-WAMBA syndrome.

Senior managers manage the Share Price not the Business. With some of them it's almost a badge of honour that they don't need to understand the underlying technology of the business. As long as the share price (and occasionally the divi rate) matches or outperforms the market sector average, (ugh) they are a success.

The fact that in doing so they have sown the long term seeds of destruction of the business doesn't matter. .

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Anonymous Coward

Re: Not a new management process...

Need to get me one of those sails for my boat!

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Anonymous Coward

> If you're an IBM contractor or client impacted by these changes, feel free to write to me.

Leading to a web form? Ugh. Not going to happen.

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Will signal suffice? My number is on the contacts page

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IBM have done exactly this before in Aust

IBM pulled this exact same stunt (10% haircut for all contractors, otherwise your contract is terminated) a few years ago while I was working for the EBR team in Australia.

That was the last time I ever worked for IBM, as it demonstrated their contracts are literally not worth the paper they're er... printed on.

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Happy

In all honesty the best thing that can happen to IBM now is that they spin off all their main tech Areas as separate companies.

Have these separate tech companies run by. Oh I don't know lets call them Technically capable people with a bit business acumen thrown in.

Leaving those half-wits that call themselves Executive managers in the US to manage IBM's highly productive original product "typewriters"

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HP tried to do this with me years ago

I was contracting with them (through an intermediary company, not directly) and they were in their post Compaq acquisition cost cutting phase.

The intermediary called me and told me I'd need to take a 10% cut, I said no way and went to talk to the guy at HP who had brought me in. He said he was under pressure from some SVP to reduce his spending on contractors by 10%, and had sent a notice to the intermediary to cut everyone's rate by 10%. I told him I'd quit immediately (in the middle of a big project) if my rate was cut, and he said he'd fix it and the intermediary called me later to tell me I wouldn't get cut after all.

You should never let a company cut your rate, because if they need more savings the next quarter they'll know who is willing to roll over and take it!

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Re: You should never let a company cut your rate

It's nice to be indispensable, because it means you can easily stand up to such tactics. However, there are lots of less-indispensable workers who might well find that a refusal to take the cut would result in termination. They have to make a more difficult judgement call, make a choice, and hope. Taking (only) a 10% hit, and then hoping to later jump ship might look like the best option.

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Re: You should never let a company cut your rate

Every contractors first priority is to secure the next renewal (preferably by fair means, such as making yourself indespensible).

I understand that not everyone gets to fit into that bracket, but if your job security is based on your skillset and ability to deliver (i.e. reputation). If you don't stand up for yourself, no-one else will.

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Re: You should never let a company cut your rate

" if your job security is based on your skillset and ability to deliver (i.e. reputation). If you don't stand up for yourself, no-one else will."

And if your reputation is good enough you'll be able to walk into another job elsewhere.

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Re: You should never let a company cut your rate

"And if your reputation is good enough you'll be able to walk into another job elsewhere."

100% Agree, although it can sometimes be a bit of a ball-ache when you are vested in the projects you are working on (not the done thing I know, but someone's gotta care).

Also, I sometimes don't push for rate rises (it can make things awkward for the team manager come renewal time); as an alternative I push for things that the team manager has discretionary decision making powers over - such as remote working (which can often be equivalent to a healthy rate rise, in addition to reduce hours travelling etc.) - if I've built up some of those kinds of benefits I find myself reluctant to just push off somewhere else where I'd have to start building the trust again.

Having said that, if things get sticky all that goes by the wayside and I will just bugger off and they know it :)

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Re: You should never let a company cut your rate

"I find myself reluctant to just push off somewhere else where I'd have to start building the trust again."

It helps to work on multiple company projects and being able to liaise with staff in the others. That way you can collect a number of contacts who trust you before you even work for them.

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Re: You should never let a company cut your rate

"It helps to work on multiple company projects and being able to liaise with staff in the others."

This is basically what I've just done, I've moved into another role with an established level of trust right from the off, but you're always having to deal with all the exclusion clauses in the contracts these days - even if they aren't strictly enforceable, if both parties are aware of the restriction the new client won't take you on if it's going to piss off one of their major accounts.

Developing projects and contacts at other companies is much harder these days as well, since most of the projects I'm running are pretty involved and I'm not sure I could cope with page-shifting whole networks & designs in and out of my head several times a day - my brain just can't cope with that anymore - I'm getting old! :)

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Re: You should never let a company cut your rate

> Every contractors first priority is to secure the next renewal (preferably by fair means, such as making yourself indespensible).

Not true. When I used to contract (for many years), my first priority was to get the job done well. Preferably very, very well.

In the interviews I also made it very clear I'm not a long term contractor. eg if you're wanting someone to stick around for multiple contracts or go perm, I'm not your guy.

Clear communication up front + an established skill set, good reputation, and good references are what worked for me.

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Anonymous Coward

Bewildered

How is this going to help those companies that are a customer of IBM?

All the gurus are leaving in droves and what we are left with isn't impressive at all.

The English spoken/written by the "low-wage nations" is sub par. The amount of time wasted with miscommunication is ludicrous.

Also the lack of responsibility between the rotating offshore tech team is also another nightmare that everyone is being forced to deal with.

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Anonymous Coward

Re: Bewildered

> The English spoken/written by the "low-wage nations" is sub par.

With the exception of the Philippines. I think it's something to do with their education system being based upon American English. To the point where many speak with a clearly US accent.

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