IBM and SAP to slash thousands of jobs

IBM and SAP are the latest companies in Silicon Valley to announce their plans to cut thousands of jobs, following similar moves made by Spotify and Alphabet earlier this week. 

IBM has revealed it will cut around 3,900 jobs, amounting to 1.5 per cent of its global workforce. The layoffs will cost the company about $300m (£242m) this quarter, a spokesperson confirmed.

German software giant SAP also said it planned to lay off 2.5 per cent of its global workforce of 112,000, amounting to around 2,800 jobs. The restructuring will cost SAP between €250m (£219m) and €300m (€263m).

The companies have explained the layoffs as part of an effort to restructure their businesses towards specific products and models.  

An IBM spokesperson told CNN that the layoffs were “entirely related” to the spin-off of Kyndryl and the disposal of health data and analysis businesses and that it was “not an action based on 2022 performance or 2023 expectations.”

Kyndryl is an IT infrastructure services business that was officially separated from IBM in November, while it was IBM’s healthcare analytics business, which an investment firm is now in the process of acquiring.

While IBM is letting go of these business ventures, the company announced last year that it will invest $20bn (£16.4bn) in semiconductors, quantum computing and other cutting-edge technology in New York state.

“Clients in all geographies increasingly embraced our hybrid cloud and AI solutions as technology remains a differentiating force in today’s business environment,” said Arvind Krishna, IBM chief executive officer, in an earnings release.

Similarly, in a live-streamed presentation to reporters, SAP CEO Christian Klein said that the restructuring was “targeted” and would allow the company to invest in the areas “where it really matters for SAP to be competitive in the future,” particularly its cloud business.

SAP reported a 7 per cent year-on-year decline in operating profit in 2022, as it moved to end operations in Russia and Belarus, as well as collecting less revenue from software licenses.

The company said it would explore a sale of its Qualtrics subsidiary, which specialises in online market research software. The sale would further allow SAP to focus more on its core cloud business, the company said.

With this news, the companies join hundreds of other technology players that have recently opted to reduce their workforce due to market concerns.

Earlier this week, Microsoft announced it would cut 10,000 jobs while Google parent company Alphabet announced it would lay off about 12,000 people worldwide. 

The announcements followed the confirmation of Amazon’s plans to lay off  18,000 employees, as well as the announcement that Meta, the parent company of Facebook, Instagram and WhatsApp, would be cutting its global workforce by 13 per cent.

Twitter, Lyft, Snap, Stripe, Salesforce and Spotify are some of the other technology firms to have laid off workers in recent months.