A Look Behind IBM's New Hires

By Allen Bernard

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IBM's announcement last Friday if its intention to hire 10,000 new employees is indicative of how much and where IT departments will be spending their dollars in 2004 and beyond.

The company made its decision based on feedback from customers and what it sees as a stabilized economy, said Joe Stunkard, director of IBM's Media Relations. Over the next few years, its customers have indicated they want more open standards based products and services, and help in leveraging existing infrastructure to get the most out of their existing investments.

"Demand's not yet across the board but we have seen it strongest in areas where we've tried to position IBM in things like high-value services (i.e. the PricewaterhouseCooper's acquisition) ... middleware technologies, Linux, open standards-based hardware and software," said Stunkard. "Those are the types of things where we see these 10,000 new positions in these key skill areas."

Perhaps most indicative of just how much its customers are willing to lay out for this work is IBM's decision to bring on brand new employees. All of the positions will be filled with new hires, said Stunkard, not employees gained through acquired employees or outsourcing contracts.

Layoffs Can Still Happen

But, this doesn't mean the company won't continue to layoff in other, said Stunkard. What it does mean is IBM's focus on developing open source and standards is what customers want and where they are willing to spend money in the coming years.

"Were trying to give some indication of what we see as opportunity certainly for IBM across the IT landscape and certainly in a lot of customer engagements," he said. "So, it's one of the things we wanted to talk about, what we see coming available for us."

This meshes nicely with what analysts also see as the hot IT areas over the next few years.

"IBM is basing this calculation on their visibility into '04 on large IT budgets," said Aberdeen's Cheif Research Officer Peter Kastner. "IBM sees customers demanding more management and control of their heterogeneous computing environments. The 10,000 ... are needed in order to accelerate IBM's computing on demand initiative which is all about autonomic system management."

This doesn't necessarily mean those budgets will be spent out in 2004, added Kastner, but it is a strong signal companies are getting ready to begin the process.

Strong '04 Growth

"What it tells me is IBM believes the business cycle will be strong enough to support a growth in R&D spending that can be offset by higher revenues without hurting IBM's bottom line and their stock," he said.

Overall, Aberdeen is calling for a four- to five-percent up tick in IT spending for 2004.

The Yankee Group's Andrew Efstathiou, program manager, agrees that 10,000 new hires is definitely a very good sign things are looking up but, even more important is where those people will be working at IBM.

"They are very aggressive about their on demand computing strategy and to do that requires pushing into those skills sets," he said. "I think the number of people is less important than the skills sets they're intending to develop."

Marketing Moves

At a whole other level, however, announcing its intentions can also be viewed as a shrewd marketing play, said Jim Murphy, senior analyst at AMR Research.

"At least in part, this is kind of a notice to customers that they are investing in Linux and open source," he said. "That will, as a marketing move, put people on notice we're really putting a concentrated effort into this business and you can move in this direction now verses moving forward with Microsoft."

Where these jobs will come from is also an open question, said Murphy. If IBM goes in search of employees overseas to India or China, for example, to fill positions this announcement may not necessarily spell good news for unemployed U.S. IT folks. As of press time, IBM could not be reached to answer this question.

But whether the jobs are homegrown or not, 10,000 new hires is certainly a good indicator things are looking up and that is a welcome change from the past few years, said Efstathiou.

"I think IT is beginning to turn up," he said. "There is pent-up demand and we're beginning to see that pent up demand being filled rather than remaining pent up so, I do think this is a bellwether of that."