IBM is considering cutting three-quarters of its 399,000 permanent staff in the next seven years and re-hiring them for projects as part of an HR strategy due to end in 2017.
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IBM told Computer Weekly's sister publication Personnel Today that it could reduce its workforce from 399,000 today to 100,000 in 2017.
Tim Ringo, head of IBM human capital management, said IBM would re-hire the workers as contractors for specific projects and, when necessary, use crowd sourcing.
He said it was only being considered at present.
"There would be no buildings costs, no pensions and no healthcare costs, making huge savings," he said.
Robert Morgan, director at sourcing consultancy Burnt Oak Partners, said that all the big service providers would attempt to move to this type of strategy. "It is something they have been doing over the last three years."
He said that because outsourcing contracts are often in their fourth and fifth generations, many of the cost savings have already been made.
"The only way they can make the savings now is by cutting the number of permanent staff."
He said the suppliers will be keen on retaining the staff that have the business contacts and are able to talk to them about IT.
Mark Lewis, partner and head of outsourcing at law firm Berwin Leighton Paisner, said suppliers have to get people "off their books" if they are to make the required savings.
"The only way you can do this is by making them redundant," he added.
Lewis said IBM and other employers that do this might have difficulties in Europe.
"If you make someone redundant you are saying that their position is no longer required. But then you are going to sub-contract the work back to you."
However, there is possibly a way around this is if there is an economic, technical or organisational reason for making them redundant, he said.
He said customers might also be unhappy about roles in outsourcing contracts being filled by sub-contractors. "How would a customer feel if it looked to IBM for a service but it did not have the capability in-house?"
However, an IBM spokesman denied the firm was about to shrink its permanent workforce by three-quarters in seven years.
He said: "The comments are without merit. This was pure speculation about future job movements without any basis in fact. In fact, the comments run counter to IBM's history of growing its global workforce over each of the last eight years."