IBM has initiated what a source refers to as a soft layoff within its Finance & Operations division, characterized by a return-to-office (RTO) mandate.
Employees within this division in the United States have been instructed to reside in proximity to one of two designated hubs or risk termination.
“Managers have been directed to communicate with their team members and request that they relocate to either Raleigh, North Carolina, or Poughkeepsie, New York,” the source indicated. “They are required to be within 50 miles of one of these locations. Failure to comply will result in the offer of severance.”
The severance package is reported to range from three to six months, contingent upon the length of employment.
AI will be implemented to replace people
This situation specifically pertains to the Finance & Operations group, which is perceived as a considerable expense by senior executives at IBM. “The implementation of AI is expected to replace personnel,” the source noted. “Outsourcing and the recruitment of recent graduates will persist. The aim is to maintain a lean Finance & Operations workforce while reallocating resources to other sectors, such as Consulting, which is viewed more favorably due to its revenue-generating potential.”
There may be some allowances for employees residing near Armonk, New York, or New York City, as well as a few other locations in upstate New York.
Numerous companies have opted to discontinue remote work arrangements, despite evidence highlighting the advantages of such policies, which were initially adopted out of necessity during the COVID-19 pandemic and are valued by many employees.
People are being forcibly pushed out but in a way that does not look like typical layoffs to avoid public scrutiny
The RTO mandate stipulates that employees are required to be present in corporate offices a minimum of three days each week, a policy that was initiated within IBM Software in 2023 and extended to its Consulting division in 2024.
Management is actively monitoring compliance with this mandate, utilizing private calls, instant messages, and emails to issue reminders, according to our source. “Should an employee fail to adhere to this requirement, their manager, at the direction of an executive, will pursue them to ensure they return to the office. Prolonged non-compliance may lead to more serious repercussions, with the most severe outcome being termination.”
Our source characterized this situation as a “soft layoff,” as IBM anticipates that some employees may opt not to relocate or resume commuting to a corporate office, ultimately choosing to leave the organization. This approach circumvents the expenses associated with a formal layoff, which IBM refers to as a “resource action.”
“Individuals are being subtly encouraged to exit, yet in a manner that does not resemble conventional layoffs, thereby minimizing public scrutiny,” our source elaborated, emphasizing that the tech giant aims to avoid the impression of targeting older employees, a concern stemming from various past legal challenges. “This strategy also serves to divest from sectors that executives no longer consider strategic.”
During IBM’s Q4 2024 financial briefing in January, CFO James Kavanaugh projected that employee-related cost reductions would persist at a rate similar to the previous year. “We anticipate workforce rebalancing that aligns closely with prior years,” stated the executive.
In 2024, which commenced for IBM with a workforce of approximately 288,000, the company undertook a “workforce rebalancing” that resulted in layoffs affecting “a very low single-digit percentage of IBM’s global workforce,” as reported to The Register several months ago.
According to IBM’s reported $700 million charge for “workforce rebalancing” in the current year, it is estimated that approximately 9,000 employees, representing about three percent of the total workforce, were laid off in 2024, drawing from data from the previous year. In 2023, the company announced 3,900 layoffs and incurred a $300 million charge in the first quarter, which was later revised to $400 million for the entire year.
Internally, the message conveyed is that new hires will be made to fill the positions of those who depart, although no specific details have been shared. A source indicated awareness of several individuals who have accepted separation packages, as well as one person relocating to another state.
Concerns among middle managers have been expressed, as they observe a significant loss of skills within teams, which is having a considerable impact. It has been reported that over the past year, employees were discreetly offered voluntary retirement or exit options. The CEO has remarked that “thousands will be replaced by AI,” and management is currently prioritizing cost reductions and a slowdown in hiring. While he mentioned thousands, it is anticipated that the actual number of replacements over the coming years could reach into the tens of thousands.
AI will be implemented to reduce the workforce … by focusing on hiring people in AI, machine learning, and data science
Within IBM, employees are reportedly still exploring how to effectively utilize watsonx, the company’s enterprise AI service.
“For instance, last year, employees were encouraged to adopt Watson Chat Assistant and develop a use case and strategy for its implementation,” our source detailed. “Teams were subsequently evaluated, and winners were chosen.”
The objective is to implement the most promising ideas to enhance operational efficiency. Beyond the confines of the mainframe corporation, executives are optimistic that partnerships, such as the one with UFC, will position watsonx alongside other prominent AI brands like Anthropic’s Claude, OpenAI’s ChatGPT, and Google’s Gemini.
“Over the next five years and beyond, AI will be integrated to streamline the workforce as research in large language models and AI advances, with a focus on recruiting talent in AI, machine learning, and data science, while continuing to implement ‘soft layoffs’ for roles deemed non-strategic,” our source indicated.
It has been noted that IBM is taking inspiration from Workday’s initiatives with AI agents and is considering similar offerings.
“Currently, we utilize AskHR, which functions as an AI agent managing a substantial portion of HR tasks,” our informed source stated. “Individuals with automation expertise are regarded as valuable (i.e., they are less likely to be the first to be laid off), yet they may ultimately automate themselves out of their positions.”
IBM did not provide a response to a request for comment.
