How bad are things at IBM Australia?


opinion If you were watching Australia’s technology industry closely this week, you would have noticed a disturbing pattern of events start to form around one of the nation’s largest technology companies.

Like a ghastly rough beast slouching its way towards the light, facts are beginning to simmer to the surface about what is really going on inside an ageing warhorse that has been fighting battle after corporate battle for so long that it has probably started to forget what it is really fighting for.

I refer, of course, to IBM.

The signs of trouble within IBM Australia have been apparent for some time. In fact, the story I am about to tell started in February, when it was revealed that Big Blue had once again started fighting a running battle with its own employees at its Baulkham Hills facility.

I’ve personally been out to the centre – commonly referred to as the ‘Flight Deck’ — once, several years ago during IBM’s last all-out war with its own staff in the facility. The facility, I believe, is an innocuous-looking building mostly hidden behind a grove of trees. But its innocent exterior belies the conflict that is currently reaching boiling point inside.

Over the past few months more and more details have come to light about just how unwilling IBM is to negotiate with its own staff at the Flight Deck on some form of collective agreement for the paltry amount of staff – just 80 – that work there.

If you believe the Australian Services Union – which, according to ballot papers released yesterday, represents at least 50 of the staff in the facility – then IBM has done everything in its power to refrain from negotiating with the union over a collective agreement – complying with what the union has claimed is a global policy of not negotiating with unions.

And the record of IBM’s court battle with the union in front of the Fair Work Australia tribunal certainly lend credence to that fact.

The way Big Blue’s legal team questioned its own staff appeared to be nothing short of torturous … its lawyers went to great extremes to make the company’s case that the union should not be allowed to represent the staff.

When Fair Work Australia eventually ruled in favour of the union, and IBM was ordered to enter talks with the ASU, IBM appealed the decision and asked for more time, claiming that one of Fair Work Australia’s senior bureaucrats had made an error in their ruling. That request for more time was turned down by Fair Work Australia.

But if anyone thought IBM would take that move lying down, they had another think coming.

IBM’s response – just two and a half weeks later – was to sack some 19 staff at the Flight Deck, representing 25 percent of the workforce, with the union claiming the jobs would be shifted offshore. Yesterday the Flight Deck workers voted overwhelmingly to pursue a range of industrial action – including, if it comes to that, indefinite stoppages.

It’s not the first time IBM has suffered extensive problems with workers at the Baulkham Hills facility … the same sort of trouble was going on back in 2008. And there have been other examples of poor treatment of IBM staff over the years … such as the revelation in April 2009 that Big Blue had told staff it would no longer pay for tea or coffee for staff in its Australian offices.

Pretty shocking stuff.

The other IBM news which rocked Australia’s IT industry was contained in a devastating report published on Wednesday by the Queensland State Government’s Auditor-General Glenn Poole on the state’s payroll disaster at Queensland Health – a project for which IBM was the prime contractor.

Now don’t get me wrong … there is plenty of blame to be shared around in the report, and there is no doubt that both Queensland Health and government shared services provider CorpTech share quite a lot of responsibility alongside IBM for the debacle, which has left many Queensland Health staff without pay.

For starters, the report notes that there was confusion between the trio about each parties’ responsibilities, authority and accountabilities with regard to the project, resulting from what appeared to be a poor governance structure.

Queensland Health did not formally agree to the project’s initial scope, and negotiations over the scope took place over the life of the project – resulting in over 47 change requests – a problem that resulted from business requirements not being set clearly from the beginning of the project.

Nevertheless, one fact from the report really stuck in my mind all week as indicating, in my opinion, a very serious mistake on IBM’s part right at the beginning of the project.

It was envisaged, the audit of the project found, that the new Queensland Health payroll system would be based on what was believed to be a very similar implementation of SAP software at the state’s Department of Housing, with minimal changes required for Queensland Health. This is what IBM stated about the project in the initial statement of scope:

“Our understanding is that there is a relatively small amount of functionality required as a minimum to make the interim software functional for Queensland Health that is relatively small in nature.”

IBM’s understanding of the situation proved to be completely wrong. In fact, the events of the past six months in Queensland – which have led to serious political implications for the Government, including calls for the resignation of the Health Minister – have proven how disastrously wrong that understanding was.

And that should have been evident to IBM right from the start – no matter how detailed the briefings that it was provided with by Queensland Health and CorpTech.

What should have been apparent to IBM when the scope of the new payroll system was being drawn up was that Queenland Housing and Queensland Health are about as far apart in nature as two departments can be and still be within the same government.

The simple fact – as the audit report noted – is that the Department of Housing’s implementation catered for between 1200-1300 employees and just one award structure, while Queensland Health’s new system would be required to cater for about 78,000 employees and multiple award structures.

IBM’s recommendation that the new system also use Infor’s Workbrain rostering system, I have no doubt, was intended to address this incredibly obvious issue somewhat. And certainly there is evidence that IBM went to great lengths to fix the mistake in scope after it realised it made it. But it does not explain why IBM staff believed that such a massive undertaking could ever cost it just $6.2 million to implement in the first place (in March 2010, it was estimated that IBM’s contract had blown out to $24 million … and the system still does not completely work).

After all, it’s not as if IBM couldn’t have known the risks.

Big Blue’s contract with Queensland was inked in December 2007. Just a few months before in that very year, Western Australia’s auditor-general had published a landmark report very much like the one that his Queensland counterpart Glenn Poole published this week.

In that report, WA auditor-general Colin Murphy lambasted Western Australia’s own shared corporate services project, which like Queensland’s, aimed to consolidate government financial and HR systems, for being two years late and more than $66 million over its previous $122 million budget. IBM wasn’t involved in the WA project — it was an Oracle-based project and more of the integration work was being done by the government.

But as in Queensland, the sticking point for the project was not the migration of the financial systems, but the migration of payroll systems. And – critically – Murphy had noted that part of the problem was that the complexity of the awards which governed public sector employees had been underestimated.

Sound familiar?

Now one of the disturbing thing to my mind about all of the events surrounding IBM this week was not that they happened. Other companies – Telstra comes to mind – have faced problems with unions and their staff. And other companies – Oracle, for example, was named in the WA Government’s report – have faced issued with implementing government projects, which notoriously go wrong often.

And yet this week IBM did not demonstrate as a company that it had an honest and sincere approach to these issues. Instead, two rather ironic press releases landed in my inbox lauding the company’s accomplishments.

The irony of the first – in which the Australian Computer Society announced that IBM Australia managing director Glen Boreham (pictured) had been appointed ambassador of National ICT Careers Week for 2010 (in a week in which some of his company’s highly trained and technical staff voted to pursue indefinite industrial action against his company) – must be apparent to all.

“For me, a career in ICT is about making a difference in the world. It’s about working with people, helping people, finding new and better ways of working,” said Boreham in the press release. “Helping the brightest and best coming into the workforce to realise that potential for possibility – the endless horizon”.

I bet that the Flight Deck staff couldn’t quite see that “endless horizon” when they were staring down the barrel of an IBM lawyer quizzing them in depth at the Fair Work Australia tribunal about how precisely they carried out critical backup duties … while paying for their own coffee.

The other statement – precisely one day after the Queensland Government publicly threatened to sever IBM’s contract to build Queensland Health a new payroll system and sue for damages – lauded IBM’s work on the Federal Government’s Standard Business Reporting project.

At the time IBM sent me the press release, I was a little too busy documenting Qld Premier Anna Bligh’s pledges to bring Big Blue to heel to sing its praises about its work on the SBR.

Now before anyone accuses me of demonising IBM, let’s not forget the company has had a stack of successes in Australia.

I have been particularly impressed by the energy Boreham and co have shown in dragging Australia’s governments and energy utilities into the new millennium over the past several years (even if IBM had somewhat of a self-interest in that process, and was broadly implementing a local marketing/lobbying policy set in the US), and of course we can’t forget that IBM was largely successful in its mission to help the Department of Immigration and Citizenship implement its mammoth Systems for People project.

IBM’s successes have probably been more legion than its failures … otherwise it would no doubt no longer be in business.

But just for right now, I would like to entreat IBM to stop and think about several things rather seriously. Is it treating its staff the right way? Are its processes for evaluating new work – such as Queensland Health’s payroll system – adequate?

And most of all … is it man enough to admit and learn from its mistakes?

Image credits: Patrick H, Creative Commons, IBM


  1. As an ex IBMer I did have to laugh at the lines “Is it treating its staff the right way? Are its processes for evaluating new work – such as Queensland Health’s payroll system – adequate?”

    The bigger picture here is this – IBM share price MUST stay high at ALL costs. The USA economy and Government depends on that blue chip stability. So that means the retrenchment of staff with long periods of loyalty and employment with IBM (goodbye all my 10-25 year IBM veterans earlier this year) is perfectly acceptable.

    As for the processes, well when you are running on skeleton staff made up of interns and whoever will work for pittance then you have to expect that the weak link will fail.

    I fully expect IBM Australia to go dark within the next 2 years – we (Australian workers) are too expensive and as quality of work, experience and loyalty are no longer respected why would the USA bother paying for something they can get cheaper elsewhere?

    • It will be quite sad, to be honest, if the union action at IBM does give the company a bad rep. I think a lot of people (myself included) in the IT industry feel a deal of affection for IBM as the ‘great warhorse’ of the sector — it’s been there forever, like a titanic force. And everyone knows someone who has worked for IBM, or often they have worked there themselves. I would like the company to be strong, honest and clean — not dogged by issues as it has been this week.

    • As another ex-IBM “resource” – (we were never called “people” or treated like “people”) – it is certainly true that it treats its people with a level of contempt that is something to behold. I was an IBM employee for a little over a year, and the moment you stand up for your position on just about any matter, if the potential outcome of the matter you are standing up for, has the potential to cost IBM any amount of money – (even if it was only a few dollars) – they twist it against you until you get frustrated enough to forget about it, or if you don’t you are pressured away from your position. I walked away in disgust over my own treatment in regards to a couple of different matters. I know quite a few other former IBMers with very similar stories – right down to hearing they received the EXACT same spiel from management, word for word – as if it is out of the “repress the employees playbook”…a big, old, slow-moving behemoth aristocracy of a company.

      • I’ve heard similar sentiments from quite a few IBM’ers, Michael. I’m sorry to hear you had a bad experience at the company. I think this sort of situation happens to quite a few companies when they get really big. No matter what the best intentions are of the management, they get stuck into a way of doing things, and change is really hard to achieve. Sometimes the best approach in these sort of situations is to bring in a young gun CEO who has a real passion for change — they can personally drive the change and sweep out the old practices. But in some companies the block becomes so entrenched there is no change possible without dramatic corporate restructuring (eg merger, acquisition).

  2. I discussed this with an ex-collegue of mine who works over at Baulkam, the staff on the chopping block are the mainframe engineers. Considering they are working on what is more or less an obsolete platform the fact IBM are laying them off is not surprising.

    As far as I am aware the other engineers and staff are operating the same as usual.

    • I used to think the same way, Tezz — that mainframe was an obsolete platform. But from stats I’ve seen recently, mainframe sales are actually going up, and there is still quite a demand for mainframe skills. I know that CSC does quite a lot of maintenance work in this area, for example.

      Regardless of whether the money is there for the jobs, though, I really think IBM has treated the staff in this facility poorly. Sack the poor guys or keep their jobs — but don’t refuse to negotiate with the union — in my view, it’s unAustralian.

    • Tezz, greetings from the other end of the world.
      I had to smile about your remark that the “Mainframe is more or less an obsolete platform”.. Less, I would say. Like Renai already stated, times have changed. And many existing Mainframe users are looking to replace 1000’s of distributed servers with Linux images and many have already gone that way. It’s the economy that has helped Mainframe in a positive way.
      I can not comment on IBM laying off Mainframers, but I again with Renai that there is a lot of demand for (expensive) Mainframe skills. All I can say is that this is probably a local (Australian) thing, it’s quite the opposite of what I see in Europe where IBM (and other ISV’s) are hiring and training young people to manage the Mainframe in the future.

  3. Hi there Renai and interested folk

    I am an ex-IBMer (lasted 5 years there) and am not surpised to read about IBM and how it is still treating its staff. Talk about reliving same kind of experience I had in 2001/2002. Nothing seems to have changed the way IBM mugs its staff – it is still dividing and conquering.

    In 2001 about 200 staff at St Leonards Data Centre went on strike because IBM did not want to negotiate with staff that were union members (Community Public Sector Union – CPSU) over redundancy payments. Nor did IBM want to pay the staff the correct redundancy calculations. IBM lawyers in Industrial Relations Court dressed in suits vs union battling for the workers. (Something about IBM not calculating shift allowances into the final redundancy payment).


    IBM NOT very happy. IBM transfered jobs from St Leonards data centre to Clayton data centre – they were Band 6 and in Clayton would be Band 4 – IBM expected same work load, same experience and same dedication required as a Band 6 but on much lesser salary.

    In July 2002 IBM then took the axe to over 460 workers in Australia. This was despite the Australian section of the company making a PROFIT in the last few quarters.

    A nasty situation all round. I was quite happy in the end to take the redundancy money and run.

    Have a look back to 2001/2002 in the Australian July 23, 2002 page 33 and page 35. And CPSU archives for 2001/2002. History repeating itself.

    IBM needs to keep its shareholders happy. It is easy to save money by culling workers uh sorry, “resources” (forgot my IBM-speak there).

    There is life after IBM, but it does take some time to get over being mugged in broad daylight by Big Blue :-). (Issues of trust, honesty and being treated with dignity and respect).

    I wish good luck and great fortune for the future to the IBM staff going through this current situation.
    Take care and kind regards from GM.

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