Report: IBM to Revamp Channel Organization in Major Corporate Overhaul

IBM (IBM) reportedly is putting the finishing touches on a major corporate reorganization to bet firmly on the cloud and move convincingly away from its hardware, software and service silo history that’s long dominated its business structure.

The vendor, mired in a 10-quarter streak of declining revenue, most recently posting a 4 percent sales tumble in its Q3 2014 along with a 17 percent downturn in GAAP net income, will undertake a global restructuring to create new business units for Research, Sales & Delivery, Systems, Global Technology Services, Cloud, Watson, Security, Commerce and Analytics, according to a report in the U.K.’s Register.

Mobility will serve as an overlay in some of the new groups, while IBM’s Business Partner unit is expected to house both the hardware and software channel teams, the report said.

A number of IBM senior managers already have been informed of the organizational changes coming down the pike, the Register reported, with one source suggesting it will change the way IBM traditionally has operated.

“This is a very major change,” the source told the Register. “The way IBM has worked for years is that the P&L, the power, the budgets and headcount were owned by the three groups,” referring to hardware, software and services.

New ways of conducting business prompted by the cloud are said to have convinced chief executive Ginni Rometty that IBM’s existing structure no longer serves the vendor.

“Longer term, IBM has to be a business that makes sense in the new era [of computing consumption] and be easier to work with,” a Register source said.

At this point, it’s unclear if the makeover will lead to job cuts, although the Register said its sources indicated redundancies could result in thousands of layoffs. In January, 2014, IBM initiated a $1 billion “workforce rebalancing” in which it laid off some 15,000 workers worldwide, and as recently as last October, Rometty hinted more layoffs might be coming as the company restructures around the cloud, analytics and security.

There are plenty of clues that a reorganization may be in IBM’s near-term plans. At its Q3 earnings conference call, IBM CFO Martin Schroeter said that “some of these fundamental shifts in the industry are happening faster than we planned, so we’re putting in place a series of actions to accelerate our transformation.”

And, in October, Rometty told Barrons, “We are reorganizing this company around analytics, around cloud, around social, local, mobile.”

Last fall, IBM finally shelved its much-publicized vow to deliver $20 EPS in 2015 and now its transformation could take yet another turn if word of a full-scale reorganization proves accurate.