"His successes aside, Gerstner was singularly responsible for laying off over 100,000 employees after being appointed IBM’s CEO in 1993"
https://www.deccanherald.com/opinion/social-costs-in-the-age-of-automation-3318113
10 replies (most recent on top)
I was at IBM during the Gerstner and Palmisano tenures. Gerstner's problems were different from AK's problems in that Gerstner had a lot of "potential" in the company, but he had way too much bloat. Too many mainframe "administrators", too many mainframes, too many raised floors, too many data centers. Every city with an IBM sales office or plant site (hundreds of them) had all that stuff and all those people, and it was bringing down the company. For a time, IBM was the biggest user of AT&T's international network. Gerstner RA'd a lot of those people and turned "IBM Services" into a real business.
AK's problem is different. IBM has returned to the bloat of the 1990s, but the company has been largely sold off. Services has already been monetized, but much of services along with other lines of business were also sold off. Mainframes and big servers are all IBM has left, and the "big server" (POWER) line may not last much longer. Stuff like AI and Quantum may be fruitful someday, but they are nothing more than lab experiments for now...and even worse, they are lab experiments where IBM's presence is questionable at best.
AK and his successor have problems.
IBM keeps buying companies using its income. That helps darken information about total headcount and adds up revenues of other (new) companies. Of course this strategy has an horrific effect on IBM's total debt, now over 60 billion dollars with high interest on the loans.
and how many jobs have been lost during Alvind's tenure as CEO ? can't say or won't say ?
The comparison of Gerstner to Jobs is apt.
Gerstner did stem the bleeding caused by IBM's inept leadership but he changed IBM's culture in the worst way. But he did nothing to improve the poor quality of IBM's executive leadership that caused the gaping wound in the first place. Instead he gave these same people a big bag of tricks in which sc--wing over employees became their main play. We stopped being a company that invented technology people wanted to use to being strictly a financial engineering compan. The culture of innovation that existed before Akers died under the Nabisco bandit; everytime someone had a bright idea, IBM to this day stomps those "fires" out - too risky, might cost money. This has culminated in IBM hiring exclusively in India where you get what you pay for and ki-ling its own patent engine.
Most people don't understand that when you apply tourniquet on a gaping wound, you typically have to amputate that limb. Gerstner left IBM a limbless torso unable to compete and relying on federal handouts. Pathetic with no real hope for a better future.
Jobs inherited a company in similarly dire shape; instead of relying exclusively on financial engineering, he doubled down on great design and making products people want to use.
Apple is a titan today and IBM is all but forgotten, a place where obscure Indian-born researchers are able to unscrupulously drain the lifeblood of the company for their own personal benefit.
When Gerstner took over IBM in 1993, it was losing roughly $8 billion per year.
When he stepped down in 2002, the company was making over $7 billion per year.
That's a $15 billion swing in 9 years
Gerstner going away package was 230 million dollars, he was a thief.
Compare Gerstner with Jobs.
Steve Jobs came in when Apple was 45 days from bankruptcy, did layoffs and canceled a ton of important projects and focused the company on the Mac, and later came out with iPod, iPhone, etc.
Even after Jobs was gone, the company continued to have even greater success and the workers are relatively happy.
Again, compare this with IBM and Gerstner, because both started in a similar situation.
@sya You are correct Gerstner came in at a very bad time within IBM. The previous exec’s were borrowing money to make payroll (eg going out of business). Gerstner had to stop the bleeding (layoffs) and build a viable path forward (services). Gerstner realized IBM had a monopoly (enterprise) and he had to restructure IBM around that enterprise to monetize it. What did he do? He doubled down on Enterprise design (coming out with a new Z chip and investing 500 million to invent Power) Both made enterprise viable again and that meant enterprise customers could spend money on what IBM used to give away for free (eg IBM technical expertise) Thus consulting/lab services was invented. The real measurement of IBM’s turn around was revenue per employee. In 1992 (pre restructuring) revenue per employee was 215k In 1995 (post restructuring) revenue per employee was 310k. The sweet spot being approx 300k per employee. Given IBM’s 2024 revenue of 63.5 billion that says IBM should be aiming for 212k of worldwide employees. In other words IBM still has to shrink by a fair amount.
When I first joined IBM, I believed this was a rare and necessary thing. A shared sacrifice.
Having been at Ibm now for 30 years, I realize this was the beginning of the end of everything that IBM had of value. It wasn't a one time thing, it was now a culture of continual layoff and financial engineering. This type of decision making by Gertsner led to stealing our pensions and eliminating 401 K matches. It underpins the mass layoffs in the US and the forced death march to India.
What happened back then?After losing their monopoly on the IBM PC market, Akers and his cronies sold all of the mainframe licenses for a quick buck and then a couple of years later realized there was no new licensing income. Doh! This was shareholder value at its finest and predictably it made the company worse in the long run. The top level execs got rich, and the rest of us lost our livelihoods.
And just like today, what led to IBM's problems in '93 were some terrible decisions made by the CEO and senior executives under Akers. You can substitute Arvind for Akers. There is no functional difference.
Privatize the profits and socialize the risk. Same as it ever was.
It was a bad time. My heart goes out to all those who got the tap on the shoulder. Gerstner and the leadership had to make hard decisions to save the company -- it was close to running out of money. To learn more about those decisions, check out Gerstner's book "Who Says Elephants Can't Dance?"