Big Blue Tries to Shed Inefficiency with Lean Initiative

Ann All

Last month we blogged about a Robert Cringely column that speculated IBM was about to embark on the biggest round of layoffs in its history with an initiative called LEAN -- which supposedly stood for Lay off Every American Now.


Though a number of observers pooh-poohed the idea, it started to seem a little more plausible following news that IBM would cut some 3,000 jobs, mostly from its U.S. outsourcing services business, by the end of this quarter.


Now there's definitive proof that Cringely got it right -- well, sort of. Instead of LEAN as in Lay offs, IBM is going lean as in, well, Lean -- the business process improvement methodology practiced by Toyota, military contractor Raytheon and many other companies.


IBM's Lean initiative began last fall, and the company recently expanded it from 22 customer accounts to 600, according to an Associated Press article published in CIO Today.


Make no mistake about it, there will be layoffs. As processes become more efficient, it takes fewer folks to perform them. One group featured in the article found that it needed just 40 people rather than 80 to manage 4,000 servers. One-third of the IBM employees whose jobs became superfluous during the first wave of Lean were laid off, while the remaining two-thirds were reassigned to new work, says an IBM VP.


A lot of it has to do with changing customer expectations, says a managing partner at outsourcing advisory firm TPI.


In the huge "lift and shift" efforts that have been IBM's speciality, companies typically expected relatively modest incremental improvements. Now they look to smaller, multiple outsourcing contracts to yield more substantial cost savings. And more of them are comfortable going offshore for at least some of their outsourcing deals.


As too many large companies have learned the hard way, scale is a good thing; bloat is not. If Big Blue doesn't shed some of its excess weight, it will be tough to compete with offshore firms and other services providers.

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Jun 27, 2007 12:02 PM C C  says:
A basic tenent of Lean as Toyota practices it is respect for people. Don't confuse what IBM is doing with real Lean. Once a process has been improved and more work is capable with less people than the underlying cost of the service is reduced. These people that have been freed are available to take on more work. They were hidden waste in a process. A big mistake is to lay them off (like what IBM is doing) instead of redeploying them on new business (that is now more profitable/competative because it can be done with less people). Improvements, especially so called lean ones, will never be sustainable if this is their approach. Reply
Jun 27, 2007 2:09 PM Robert X. Cringely Robert X. Cringely  says:
IBM hasn't laid-off 3000 workers by the end of the quarter, they have been laying-off 3000 workers EVERY TWO WEEKS. And for every IBM employee who goes they are dropping TWO U.S.-based contractors for a total of 18,000 heads-per-month.Yes, changing customer expectations is part of the deal, but this means LOWERING expectations. What happens when you have a service contract thatg is unprofitable to start and then you LOWER customer expectations? The customer finds the service providcer to be not in compliance then fires IBM. The only reason Big Blue isn't directly abandoning these accounts is that some of them are afraid to jump and will accept the lower level of service. This is, of course, a HUGE disservice to IBM customers and shows a total disregard for both the relationship and for what it means to have a contract.Bob Reply
Jun 28, 2007 9:08 AM Paulie Paulie  says:
I am a lean victim effective June 29th, Yessireeee, RA'd and pretty happy about it. At IBM it is not lean, with an emphasis on respect for people. It is PLAN AND SIMPLE OFFSHORING, that is what IBM is doing. Not just techs either, paper pushers, change control coordinators and such. Next will be project managers, managers and, you will have maybe 20% of IBM in the United States. The opportunities they had in this country is what made IBM Great...Wave BYE BYE Reply
Jul 2, 2007 6:30 PM Jeff Jeff  says:
I don't work for IBM, but I've been interviewing project managers who expect to be layed off from IBM. They are being replaced by Brazilian project managers working remotely. Reply
Jul 3, 2007 8:48 AM Quantum Quantum  says:
I don't work for IBM and don't intend working for a monolithic behemoth like IBM, where you are just a cog in the wheel. Based on past experiences working for big companies and as a dispassionate observer of the world around us, it is obvious that listed companies have only one overriding goal: "Maximize their shareholders profits". Everything else is just a rhetoric.So, if the costs of doing whatever the companies are doing, are much cheaper in other parts of the globe, they WILL migrate. The paradigm has long changed!For individuals to survive and THRIVE, in this outsourcing / offshoring / what not world of business, you need to do the following:a. Acknowledge that outsourcing / offshoring / downsizing / rightsizing...et al is here to stay.b. Acknowledge that change is the only constant.c. Become a VISIONARY and envision your life ahead in totality.d. Quit complaining and take stock of inherent strengths based on personality, besides the skills. d. Take time to think hard about how you can add VALUE based on your VISION for your life ahead, your strengths and skills.e. Use your creativity and prepare a self-marketing brochure that highlights your value proposition to prospective employers / clients. While preparing the self-marketing brochure, keep YOUR VISION in mind, as whatever you are going to do from now on should propel you towards your vision.f. Be open to declaring independence from the tyranny of being an employee. Free Agency is the way to go. g. MOST IMPORTANTLY, just FOCUS on what you want...your vision... and NEVER focus on the obstacles that you may perceive. Do not lament about companies laying off Americans. It is not about Americans versus non-Americans. What you focus on constantly will become your reality. So, focus on what you want and you will find new and wonderful opportunities unfolding.God Bless humankind! Reply
Jul 3, 2007 12:14 PM tunde amoo tunde amoo  says:
I don't know much about what is happening to the workers at IBM but as for the LEAN aspect i myself am a lean student from nigeria and LEAN to me is to help an organisation checkmate it's waste and excceses in other to have a productive and a good return on investment to the customers and even giving the workers a chance to proof there effecience . So i disagree with the defination as " Lay off Every American Now". But what i believe is that the Management should try and implemnt these changes gradullay cause it's definately not some thing they should rush into else they crash the whole system and miss the purpose of the LEAN implementation. And am in support of the fifth comment by " Quantum" . Regard's Reply
Jul 5, 2007 6:49 PM Some Joe Some Joe  says:
I have worked for another company which is heavily constructed of parts of the LEAN methodologies. However, it is clear from MY experience that "Western LEAN" and "Eastern LEAN" are two completly different concepts. Both look for waste, however, in the East, waste in not considered people, waste is the action that the person(s) perform(s). There has always been a trust, or bond, between the worker and the employer in the Eastern version of LEAN, that says that employer should find a place for the worker that brings more business value to the company. In the WEST, we are obviously not intelligent enough to grasp that concept. It is so much easier to simply cut that cost, rather than identifying a key task that can bring value to the company with that unique resource that the company already holds.IBM continues to make mistakes, and now they are cutting their most valuable resource. It is the same resource which car manufaturers, and eloectronics manufaturers gave away during the 60s, 70s, and 80s, in hopes of making it for another quarter. Knowledge.Isn't it interesting that IBM is a key sponser of this site, and that there is no counter-point to this blog... Except ours... Reply
Jul 8, 2007 8:48 AM James James  says:
I just left IBM. I was conquered originally from an outsourcing venture in that company after working for them for 5 years. I stayed with IBM GS for 2 years and actually went to Boulder to learn LEAN. The day I got back I accepted a position with another company and got out. While I was safe for the first couple of rounds of layoffs, the writting is on the wall. IBM is not implementing LEAN in a way that will benefit them or their customers. It is only concerned with cleaning up the bottom line and that is not what LEAN is all about.I agree that outsourcing and offshoring is here to stay and I am not complaining about it. We all have something to offer companies out there. If you are not happy where you are at or the company is not happy with you (or just inept), you are responsible for your career and need to steer the ship.Once I saw that the environment was changing in a way that was no longer beneficial to my family, I left. No tears. I am now appreciated at a new company and will leave when or if that changes.However, keep your eye on IBM as an example how not to implement LEAN. They are losing the people that they want through layoffs.....however they are losing the people that they should keep through attrition. What they will be left with is not enough to remain the outsourcing leader. Reply
Oct 22, 2008 9:34 AM Sam Daughtry Sam Daughtry  says:
Companies that utilize LEAN processes look for internal costings first; not people. Being certified in Six Sigma teaches this. Instead what has happened with IBM is that LEAN is directed towards the workers and not the overhead of management; domestic and overseas. Once IBM grasps that it has a large management overhead then will it truly understand its own processes and direction. Also "truth in reporting" must be key. Employees regardless of contractor or IBM long/short term temporary must be counted and reported for public disclosure. Without this then any company can "fudge" numbers. LEAN is not a bad practice but employees are not the dart on the board with LEAN. Costing is. Having meetings is not productivity; producing results are. Reply

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