IBM Return-to-Office mandate hits finance and ops group • The Register
IBM has begun what a source describes as a soft layoff for its Finance & Operations business unit, in the form of a return-to-office (RTO) order.
Workers in that organization in the US, at least, have been told to live close to one of two hubs, or face the ax.
“Managers are being instructed to reach out to their reports and ask that they relocate to Raleigh, North Carolina, or Poughkeepsie, New York,” we’re told. “They must be within 50 miles of one of these sites. If not, they will be offered severance.”
Severance pay is said to be anywhere from three to six months, depending upon the duration of employment.
AI will be implemented to replace people
This is specifically for the Finance & Operations group, which is viewed as a significant cost among Big Blue’s senior executives, according to our source. “AI will be implemented to replace people,” our source said. “Outsourcing and hiring fresh graduates will continue. They want to keep Finance & Operations numbers low while investing in other areas, such as Consulting, which they see more favorably due to bringing in revenue to the business.”
Some exceptions may be made for employees living near Armonk, New York, or New York City, and possibly a few other sites in upstate New York.
Many companies have decided – despite evidence that remote work policies have benefits – that they no longer want employees to be able to work remotely, a benefit extended out of necessity during the COVID-19 pandemic that many workers appreciate.
People are being forcibly pushed out but in a way that does not look like typical layoffs to avoid public scrutiny
The RTO mandate comes with the expectation that employees show up in corporate offices at least three days per week, as implemented in IBM Software in 2023 and in its Consulting group in 2024.
“This is being tracked by management and enforced with reminders in private calls, instant messages, and emails,” our source said. “If someone doesn’t comply, they will be chased down by their manager, at the behest of an executive, to go to the office. If out of compliance for long enough, they will face more severe consequences with the most severe being let go.”
The reason our source referred to this as a “soft layoff” is because IBM expects some employees will refuse to relocate, or to resume commuting to a corporate office, and will choose to leave the company. That avoids the cost of a formal layoff or “resource action,” as Big Blue likes to call it.
“People are being forcibly pushed out but in a way that does not look like typical layoffs to avoid public scrutiny,” our source explained, noting that the tech giant is keen to avoid the perception that it’s trying to get rid of older workers, an issue in numerous past lawsuits. “It is also to divest from areas executives no longer see as strategic.”
During IBM’s Q4 2024 financial call in January, CFO James Kavanaugh anticipated that cost-cutting with regard to employees will continue at a pace comparable to last year. “We expect workforce rebalancing fairly consistent with prior years,” said the exec.
In 2024 – a year for IBM that began with a headcount of about 288,000 – the IT titan took a “workforce rebalancing” to cover layoffs for “a very low single digit percentage of IBM’s global workforce,” the corporation told The Register several months ago.
Based on IBM’s reported $700 million “workforce rebalancing” charge for that year, we estimate that around 9,000 employees – about three percent of the workforce – were let go in 2024, based on data from the year before. In 2023, the biz announced 3,900 layoffs and took a $300 million charge in the first quarter, a figure ultimately adjusted upward to $400 million for the full year.
Our source said the message internally is that people will be hired to replace those who leave, but specifics have not been provided. Our contact reported knowing of several people who have accepted separation packages and one person who will be moving to a different state.
“Middle managers are worried because they see teams losing many skills and this decision is making a big impact,” we’re told. “Over the past year, people were quietly offered voluntary retirement or an exit. The CEO has stated, ‘thousands will be replaced by AI,’ and management is currently heavily focused on cuts and slowing hiring. He said thousands, but it will likely be in the tens of thousands of people who are replaced over the next several years.”
AI will be implemented to reduce the workforce … by focusing on hiring people in AI, machine learning, and data science
Inside IBM, we’re told, employees are still trying to figure out how to make use of watsonx, Big Blue’s enterprise AI service.
“For example, last year, they voluntold people to use Watson Chat Assistant, and create a use case and strategy for it,” our source explained. “Teams were then ranked and winners were selected.”
The hope is that winning ideas can be deployed to help operations. Outside the mainframe giant, executives hope that deals like the one with UFC will ensure that watsonx gets mentioned alongside other AI brands including Anthropic’s Claude, OpenAI’s ChatGPT, and Google’s Gemini.
“Over the next five-plus years, AI will be implemented to reduce the workforce as LLM and AI research grows by focusing on hiring people in AI, machine learning, data science, and continuing ‘soft layoffs’ for roles and skills they don’t see as strategic,” our source said.
IBM’s remote-worker crackdown is company-wide
We’re told IBM has been inspired by what Workday is trying to do with AI agents and is contemplating similar services.
“Today, we use AskHR, which basically is an AI agent handling a significant amount of HR functions,” our well-placed source said. “People that have automation skills are seen as valuable (ie, won’t be the first to be let go) but may eventually automate themselves out of a job.”
IBM did not respond to a request for comment. ®
