IBM, HPE Layoffs Reflect COVID-19 Uncertainty

IBM is laying off an unspecified number of workers. According to Bloomberg, the company plans on dismissing thousands of employees “in at least five states.”

“IBM’s work in a highly competitive marketplace requires flexibility to constantly remix high-value skills, and our workforce decisions are made in the long-term interests of our business,” IBM said in a statement to media. Laid-off U.S. employees will reportedly receive “subsidized” medical coverage through mid-2021. 

Although IBM’s statement provides precious little insight into the reasons behind the layoffs, new CEO Arvind Krishna might have a roadmap that demands cuts in certain areas. COVID-19 is also impacting tech companies around the world, especially those with clients who are reconsidering whether to renew expensive contracts for services and subscriptions. 

IBM isn’t the only major tech firm making drastic moves in the face of the pandemic. Hewlett-Packard Enterprise (HPE) announced layoffs and temporary cuts to employee salaries. “The global economic lockdowns since February significantly impacted our fiscal Q2 financial performance,” HPE CEO Antonio Neri wrote in a statement. “We are taking decisive steps to navigate the near-term uncertainty, while ensuring we align resources to prioritize growth areas so that we are well positioned to accelerate our edge-to-cloud strategy and address the needs of our customers in a post-COVID-19 world.”

IBM has already been making sizable adjustments to its workforce over the past several years. In a lawsuit deposition uncovered by Bloomberg in 2019, for example, a vice president of human resources admitted that IBM had terminated as many as 100,000 employees in order to boost the company’s image to Millennials. At the time, a spokesperson retorted: “We have reinvented IBM in the past five years to target higher value opportunities for our clients. The company hires 50,000 employees each year.”

In late 2019, IBM also laid off another 2,000 employees who were not performing at “a competitive level.” The company’s statement on that round: “We are continuing to re-position our team to align with our focus on the high value segments of the IT market—while aggressively hiring in critical new areas that deliver value for our clients and IBM.”

COVID-19 is forcing many businesses beyond IBM and HPE to radically adjust—not only with regard to their short-term plans, but also what they focus on in the longer term. For example, many businesses might decide to reorient their strategic roadmaps around cloud-based applications and platforms, as well as automation. Analysts at Morgan Stanley and Oliver Wyman recently predicted that data management and cloud computing jobs will benefit from strategic shifts driven by COVID-19, an assertion supported by hiring patterns on Dice

Even if IBM and HPE emerge from this crisis in radically different (and relatively healthy) form, they will still face substantial competition not only from cloud giants such as Microsoft and AWS, but also startups determined to make enterprise software and services easier to use. 

Visit our COVID-19 Resource Center, which aims to provide the tech community with the best, most up-to-date information on the novel coronavirus. 

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