Big changes are underway at Big Blue: IBM is hiring and firing large numbers of employees in a bid to transform its business for the cloud computing era. And Massachusetts, where IBM is a major employer and frequent buyer of startups, is seeing both sides of the rearrangement.
A round of IBM layoffs in late February struck some Massachusetts employees, according to Lee Conrad, who heads the employee group Alliance@IBM. The job cuts occurred at the company’s office in Littleton, he said, though he doesn’t know how many. IBM hasn’t shared any specifics about its recent job cuts in the U.S.
Some analysts have predicted IBM will lay off at least 13,000 this year. IBM’s Littleton office is focused on its software business, however, while the firm’s declining hardware business is thought to be bearing most of the new job cuts.
While it’s too early know whether the Boston area comes out ahead in the shake-up, some signs do point to new investment here by IBM.
The firm currently lists 95 job openings in Massachusetts, many for software developers. More hiring is planned but not yet advertised for IBM’s Cloudant unit in Boston. IBM closed its acquisition of the database technology startup on March 4, and the executive heading the team, Derek Schoettle, says IBM now plans to “invest heavily in every aspect of the business” at Cloudant over the coming year.
In the last few years IBM suffered a sharp drop in demand for its traditional hardware products, such as servers and storage. In 2013 alone its hardware revenue fell by nearly 19 percent, or $3.3 billion.
Cloud options that let users save money by renting online IT services, instead of keeping data onsite, are partly responsible. Top players there include Amazon Web Services and Rackspace. IBM rivals such as Hopkinton-based EMC have also grabbed market share in hardware.
The Armonk, N.Y.-based company has responded by spending billions on R&D and acquisitions. IBM last year paid $2 billion for Texas-based SoftLayer, which is behind a cloud service that competes with Amazon and Rackspace. And the firm said in January it will invest $1.2 billion to grow its network of cloud data centers.
Cloudant fits into the “new IBM” by competing with another part of Amazon’s cloud business. The unit’s database service allows data storage to be distributed across the cloud, rather than being located in a single data center. It ultimately eases the development of mobile and Web applications, something that large businesses are increasingly looking for.
Growing by acquisition
Schoettle, who’d been chief executive at Cloudant, says the 65-person team gets to stay at its office in Boston, and will expand there. “There’s a commitment on IBM’s behalf to really invest and make this a key piece of their strategy going forward,” he said.
The Cloudant unit is planning to add staff in field operations, engineering, sales, and other areas of its business over the coming year. “I think we’ll be helping the employment rate in Boston, Seattle, San Francisco, and the UK pretty dramatically over the next couple years,” Schoettle said, referring to Cloudant’s office locations. “We’re 65 today, and I think if you talk to me in a year, that’ll be a percentage of what we’ll be.”
IBM is the most frequent acquirer of Boston-area startups, with a total of 22 acquisitions made in Massachusetts since 2003, well above other top acquirers here such as Cisco, Oracle, and EMC. With IBM remaining hungry to acquire — the firm is in the midst of a five-year acquisition plan that began in 2010 — it wouldn’t be surprising to see more IBM acquisitions in Boston before long.
Hiring around Boston area planned
The firm’s acquisitions have formed the basis for its significant presence in Massachusetts. The company has described its IBM Mass Lab in Littleton and Westford as its largest software development lab in North America, employing more than 3,000. While the company doesn’t give its total Massachusetts employee count, LinkedIn data suggests more than 5,000 people in the Boston area currently work at IBM.
The job openings listed by IBM for Massachusetts include 63 positions in Littleton and Westford, most of which are for developers. The rest of the openings are in Cambridge, Boston, Waltham, and Marlborough.
A number of the open jobs in the Boston area involve developing for Watson, the Jeopardy-winning artificial intelligence technology that’s become a symbol for IBM’s attempted reinvention of itself.
In a letter to shareholders, IBM chief executive Ginni Rometty admitted the company’s performance “did not meet our expectations” in 2013. Overall revenue for the year fell 5 percent to $99.8 billion.
In response IBM is pursuing a “bold agenda,” she wrote, and “we believe it will reshape our industry.”