IBM is at it again. The tech behemoth announced this week it's cutting "a low single-digit percentage" of its global workforce. At 270,000 employees, that's anywhere from 2,700 to 5,400 people facing the axe. The official line? Rebalancing the workforce to focus on high-growth areas like AI.
Decoding the "Rebalancing" Act
Let's be clear: "rebalancing" is corporate-speak for layoffs. IBM isn't alone. Amazon, Oracle, and even UPS have announced significant cuts recently. What sets IBM apart is the narrative around AI. CEO Arvind Krishna is betting big on AI consulting and software. Bookings surged to $9.5 billion in Q3, a $2 billion jump from the previous quarter. That's a 26.7% increase, for those keeping score at home.
CFO Jim Kavanaugh claims 80% of IBM's AI clients are new. That sounds impressive, but what's the baseline? 80% of what number? Without knowing the total number of AI clients, the claim is practically meaningless. It's classic corporate smoke and mirrors.
The real story, as always, is in the details. Reports indicate the cuts are hitting the infrastructure division hardest, with one source estimating a 50% reduction in the US infrastructure group. That's a seismic shift, not a mere "rebalancing." It suggests IBM is actively dismantling a core part of its business to chase the AI dream.
And this is the part of the report that I find genuinely puzzling. If AI is the future, why gut the infrastructure that supports it? Are they planning to outsource everything to the cloud? (A move that, ironically, would benefit companies like Amazon and Oracle, who are also laying people off).
The Red Hat Question Mark
IBM's pivot towards software is also noteworthy, especially considering the performance of Red Hat, acquired in 2019 for a hefty $34 billion. While software revenue overall jumped 10%, growth in Red Hat's hybrid cloud business has slowed. The acquisition cost was substantial (reported at $34 billion). Was it worth it? The market seems to be questioning that now.
The "Resource Action," as IBM euphemistically calls the layoffs, gives employees 30 days to find another internal position or face termination. Thirty days to reinvent your career within a massive corporation? The odds seem stacked against them. And while IBM claims its overall US headcount will remain "flat," that's cold comfort to the thousands facing unemployment. IBM Is Laying Off Thousands of Employees
The company currently lists 366 open positions in the US, ranging from senior software developers to business development executives. But those roles require specific skill sets. A mainframe engineer isn't going to magically transform into an AI consultant overnight.
It's also worth noting that IBM isn't the only tech giant turning to AI to automate internal processes. Earlier this year, IBM used AI to automate the work of a couple of hundred HR employees, shifting its hiring focus to more technical and sales-oriented roles. The irony is palpable.
The Numbers Don't Lie
IBM's AI bet is a high-stakes gamble. The layoffs aren't just about cost-cutting; they're a sign of a fundamental strategic shift. Whether it pays off remains to be seen, but the short-term pain for thousands of employees is undeniable. And if the infrastructure division is truly being decimated, IBM may find itself with a shiny new AI engine and no road to drive it on.