IBM asks contractors to take a pay cut

Big Blue is 'shifting service delivery model to dedicated employee workforce' but clients aren't happy

Exclusive IBM is not just banning the hire of new contractors and telling existing contractors they won't get new gigs: now it is telling some current contractors they will have to take a pay cut.

Multiple IBM contractors in Australia have contacted The Register to say IBM has told them their rates will be cut, by ten per cent or more. The consequences of refusing the pay cut are unclear. We understand that the offer is not being made to all contractors, but cannot say if it is confined to Australia or more widespread. For what it is worth your story about the contractor freeze started with Australian sources but was quickly confirmed from other nations.

But contractors around the world have told The Register that ban on temporary workers has not been well-explained to clients and is negatively impacting morale within the company.

One contractor told us that the IBM client at which he worked has insisted he stay on. IBM has therefore had to hire him as a permanent worker to satisfy the client.

Another contractor told us that the IBM client she serves has resorted to hiring IBM's former contractors itself to ensure they have the people needed to finish projects. “It's a shambles,” the contractor told us. “Credibility is shot. IBM doesn't even care that it's losing so much revenue because of this.”

One contractor told us that despite recently renewing his contract, he was subsequently told that his contract would be terminated. The news was delivered by phone while the contractor was on holiday. Again, this contractor tells us his imminent absence was not explained to the customer.

“No consideration on customer service and no backup plan on how to support the customer,” the soon-to-be-former contractor told El Reg.

Other contractors tell us that the IBM offices in which they work have seen significant redundancies among permanent staff, leaving the contractors to train offshore IBMers. “They are moving the support in China,” an IBM contractor told El Reg. “We were given three months to transition to people who will support our product so been basically teaching them what to do when we are gone.”

The Register understands that IBM's account managers are working through what the departure of contractors will mean with clients on a case by case basis.

The company has also provided us with the following statement:

As a result of market demand and feedback from clients, IBM is shifting its service delivery model to be heavily weighted to providing services with our dedicated employee workforce. We believe this will help IBM accelerate the benefits of cognitive technology services for our clients around the world.

IBM is not alone in cutting costs or moving workers to nations where people work for less than is paid in more highly-developed economies. HPE, for example, has a publicly-revealed target to have 60 per cent of people in low-wage nations.

IBM is also in the position of being the sole credible supplier for some goods and services, as a recent five-year, AU$96m deal to lease and maintain a mainframe at Australia's Department of Human Services demonstrates.

Whether such organisations will want to talk about cognitive anything if IBM isn't providing the people they want, where they're wanted, is anyone's guess. But with IBM's revenue slipping for twenty quarters in a row, it's clear the company needs happy customers willing to talk becuase the company's many cost-cutting measures alone are not going to turn things around.

If you're an IBM contractor or client impacted by these changes, feel free to write to me. ®

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