IBM's corporate restructuring announced late on Wednesday points to the computing giant's struggles in reshaping its massive Global Services division around high-margin business consulting services.
As a big part of the effort, Big Blue will institute a series of changes in its operations, including planned layoffs of between 10,000 and 13,000 employees, the company says. The brunt of those changes are planned for its European operations.
The goal of the restructuring is to reduce bureaucracy, eliminating the need for a traditional pan-European management layer and creating small, more flexible teams that can work better across borders. Around the world, IBM plans to consolidate service work into fewer locations.
The announcement follows disappointing financial results for the first quarter of this year. The restructuring is expected to involve a pretax charge of $1.3bn-$1.7bn (£680m-£890m) in the second quarter.
The moves illustrate an internal race at IBM to retool its $46bn Global Services division, which represents half the company's revenue. Big Blue is pushing aggressively into high-end business consulting and outsourcing services, yet it's still tied to its traditional services business. It's restructuring efforts are designed to accelerate its move toward business consulting and away from traditional computing services.
"The dilemma IBM faces is that they have the most coherent strategy and simultaneously the most retrograde businesses," says Mark Stahlman, an analyst at Caris & Company. "The traditional body-shop consulting and outsourcing components of Global Services are lagging."
As part of its shift, IBM plans to announce on Thursday another in a line of business consulting services, which it calls business performance transformation services (BPTS). Its latest offering will let corporate clients contract with IBM product designers and consultants to explore business opportunities pegged to new products.
The impetus behind the "transformation" services is to give IBM a larger portion of corporate spending, including money dedicated to nontechnology functions such as human resources, accounting and customer support. The way it works is that IBM either takes over a customer's processes wholesale or dispatches its business-savvy consultants to rewire how that company does business. IBM estimates that spending on these business processes comes to some $500bn.
