Firms Shifting Focus
News on layoffs has become a norm nowadays. Some blame it on the economic slowdown, some on political bureaucracy while others blame it on offshore outsourcing. There could be a number of reasons for the job cuts but it all boils down to “cost reduction”.
Microsoft Corporation (NASDAQ: MSFT) sent a second wave of layoff notices to more than 3,000 employees. Microsoft issued a public statement regarding the layoffs saying they did it in response to the global economic downturn. And this might not be the end of the flying pink slips as Microsoft CEO Steve Ballmer explains: “As we move forward, we will continue to closely monitor the impact of the economic downturn on the company and if necessary, take further actions on our cost structure including additional job eliminations.” Though the company is applying cost cutting measures, Microsoft still plans to hire about 2,000 to 3,000 employees this year in some of its growing business segments.
Microsoft isn’t the only company chopping jobs on certain business divisions and moving them on more profitable business segments. Hewlett-Packard Company (NYSE: HPQ) is also capitalizing on current market conditions. HP reported a 17% decrease in second quarter earnings as sales fell on almost all of its business segments, especially its PCs, servers and printer business. HP’s services business, on the other hand, experienced a 99% jump in revenue due to its EDS acquisition, making it the firm’s largest business unit. HP seems to be shifting its focus. Instead of restructuring its main PC business, it diverted its attention to its more profitable services business. With its EDS acquisition, HP could go from a PC maker to an IT consulting and outsourcing firm.
HP plans to go head-to-head with International Business Machines Corporation (NYSE: IBM) in its venture into the services business arena. HP investors are happy with the EDS acquisition, they like the steady flow of revenue that comes with the services business, as well as the idea that services can be used to support other HP products like software and servers.
IBM doesn’t want to share any big technology outsourcing contract with HP. So IBM fires back by hiring a former executive of EDS. Sean Finnan is the former managing director of EDS in the UK and also served as VP for EDS’ CRM practice. IBM now has an edge over HP as Finnan knows how EDS’ business works, IBM could use Finnan’s experience to push their services business even further.
Going back to the layoffs, with every obstacle there’s opportunity and firms shifting business focus is a strong indication that this is indeed true. This could be the chance laid off workers have been waiting for. If this is going to be a growing trend, individuals need to find out which kind of job would likely get a boost from the shifting action.
Author: Kim G.
Tags: HPQ, MSFT, offshore outsourcing, outsourcing firm, services business
May 24th, 2009 at 11:52 am
It’s interesting that those firms in countries such as France and Italy, where it’s harder to layoff staff, are being forced to look at other ways of driving out cost and improving efficiency before resorting to cutting personnel. My concern for US and UK firms is that they resort immediately to firing staff before making changes to processes and operations. Oddly enough, the more companies get their house in order with their internal processes, the greater the business benefit of using third party managed services… hence knee-jerk layoffs are not good for anyone. I don’t like this culture of laying-off as the first strategy these days…
Phil Fersht
May 25th, 2009 at 6:05 am
@Phil Fersht. I agree with you. Companies planning to trim their payroll should first look into their financial statements and operational performance to determine how they could bring down cost without immediately resulting to mass layoffs. Once this has been done and if there is still a need to cut costs then they could proceed, but this time the layoffs would not be in such obscure numbers. The “Worker Adjustment and Retaining Notification Act” (WARN Act) was made to protect workers and their dependents by requiring employers to notify workers 60 calendar days ahead of the mass layoff. However, WARN Act also states that employers can give notice for less than 60 days if the layoff is a result “from the closing of a faltering company, unforeseen business circumstances, or a natural disaster”. This has been the common excuse used by US companies for the mass layoffs. We might not be able to do much with the layoffs, but at least we could try to help the displaced workers by giving them direction as to where they should go in these trying times.
Regards,
Outsourcing Insider