Could IBM really function with tens of thousands fewer staff?

Could IBM, or any of the large IT and BPO service providers, still function with tens or even hundreds of thousands fewer staff?

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Could IBM, or any of the large IT and BPO service providers, still function with tens of thousands or even hundreds of thousands fewer staff?

Whether IBM is still the bellwether of the IT industry or not is up for debate. But regardless of the outcome of such a debate, talk of mass redundancies at the IT giant will always spark discussion about the future of the industry.

Recent years have seen speculation about the size of IBM’s workforce. There has been talk of up to 100,000 IBMers in India being cut. And a few years ago there were suggestions of up to 300,000 being let go globally.

Although both stories were not confirmed, there is no smoke without fire.

Perhaps because it is an IT giant with a long history, talk of scaling down is likely to occur whenever financial results are not so good, but could IBM really function with so much less human resource? For that matter, could any of the large IT service providers operate with such a reduction in staff?

IBM has more than 400,000 employees globally – about the same as the urban population of Liverpool.

According to a recent report from India, IBM reduced its India-based workforce from about 165,000 in 2011 to 113,000 in 2014. The report quoted sources close to IBM’s plans who said this number will fall to 100,000 in 2015.

The introduction of modern technologies that make services less labour-intensive is reducing the need for staff in lower-cost locations. At the same time, IBM, like much of the industry, is trying to move away from linear business models based on the provision of full-time equivalents.

And talk of IBM cutting swathes of staff is nothing new. In 2010 a senior HR executive at the company told Computer Weekly’s then sister publication, Personnel Today,  that IBM was looking into the possibility of cutting its workforce by almost 300,000. He said the strategy would involve making people redundant and rehiring them on a project-by-project basis. It would have reduced IBM’s 399,000 workforce to 100,000 by 2017.

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At the time, the IBM executive said this was something that was being considered. The plan obviously never got off the ground because IBM has grown globally, but it reveals what large corporates talk about behind closed doors.

As industries mature, practices become more efficient through the use of technology and fewer human resources are required. The IT services sector is no exception.

Modern technologies such as artificial intelligence (AI), as well as automation, are reducing the workforce in many industries. The combination of fewer people in IBM’s back office and fewer at the front end serving customers could point to a much smaller workforce in the future.

Recent research by Oxford economics revealed that in 2013, IT and digital services contributed more to the UK economy than any other part of the business services sector. But it also showed that although turnover created by IT and digital services has increased by about £6bn over the past four years, no more jobs have been created in that time.

In the past, people carrying out business processes or IT work at an organisation might have feared their role being outsourced to a service provider at lower cost.

Then the internet enabled BPO and IT services to be delivered remotely. Workers then feared that their jobs would be taken over by a provider in a low-cost region of the world.

Software robots

But now even those staff are under threat from software robots, with service providers and their customers automating tasks that were previously carried out by people.

For example, an AI platform system from IPSoft, fronted by an avatar known as Amelia, can be used in technology helpdesks, contact centres, and to advise field engineers.

The platform has an understanding of the semantics of language and can learn to solve business process queries like a human. It initially learns using the same manuals as humans – it can read 300 pages in 30 seconds – and then learns through experience and by observing the interactions between human agents and customers. 

In a pilot project with an oil company, Amelia helped engineers fix equipment in remote locations. Because the system has read the manuals, the engineer can ask it to send information about a problem, diagnose the cause and suggest a fix.

A large media company has deployed the software in a central service desk that helps call operators deal with complex issues. It went from solving very few queries independently to 42% of the most common queries. After passing on queries that it could not help with, Amelia successfully learned the process from the human agent, so it could apply it next time. By the second month, Amelia could answer 64% of queries independently.

It seems inevitable that jobs within outsourced service providers will be performed by robots, just as workers at outsourcing companies have replaced staff within businesses.

Cloud computing

Then there is cloud computing, which is reducing the need for every business to develop its own software and is also giving companies easy access to software robots.

Professor Ilan Oshri at the Centre for Global Sourcing and Services, Loughborough University School of Business and Economics, said: “We are witnessing a trend of a reduction in human resources in the IT space. These reductions coincide with the introduction of new technologies and platforms such as SaaS, PaaS and IaaS and automation.”

But questions remain about whether the trends are linked, said Oshri. “Many suppliers that promote such technology solutions claim that the two are indeed connected. However, our research suggests that the adoption of recent technology solutions is far from simple and straightforward, and requires time and effort to yield benefits.

“In our research, we showed that the vast majority of the firms are actually still not ready to adopt such tools, let alone to truly benefit from their value. In many cases we have examined, the adoption of such solutions, such as automation, is likely to result in a hybrid model in which both the human resource and advanced software solutions will be critical.”

Business models

John Keppel, partner and president North Europe at sourcing advisor the Information Services Group (ISG), said advances such as the use of AI, automation software and platform-based solutions are an evolution of the business models that created the IT services industry in the first place. 

“We have been through waves of productivity improvements over the years, and robotics and automation are simply the latest developments and certainly won’t be the last,” he said. “In outsourcing’s infancy, it was all about achieving value through scale. Then, as globalisation hit, it was access to talent. Then came the access to lower-cost labour we all witnessed through the boom in offshoring.”

Keppel said the latest wave is creating opportunities in BPO with growth opportunities, but direct job numbers will remain flat in the short term. “Job growth may well be back in the IT domain,” he said. “The automation in IT areas has released capacity which can now be deployed on developing the next-generation software that enterprise organisations need to meet the digital agenda and to advance the automation solutions for business process areas.”

Research by Carl Benedikt Frey and Michael A Osborne in 2013 estimated the probability of computerisation for 702 detailed occupations.

The study, The future of employment: How susceptible are jobs to computerisation, listed the jobs and, using a methodology, estimated the probability of their computerisation.

See from the table below whether your job is at risk of being taken over by a computer (0% = non-computerisable, 100% = computerisable).

Likelihood that your job will be computerised
Telemarketers 99%
Accountants and auditors 94%
Retail salespeople 92%
Word processors and typists 8%
Machinists 65%
Commercial pilots 55%
Actors 37%
Firefighters 17%
Chemical engineers 2%
Recreational therapists  0.3%




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