Layoffs at Red Hat: Is IBM Calling the Shots?
Recently Emmanuel Wilder, a Data Solution Manager at IBM’s Red Hat, posted on Linkedin saying he has been laid off from his role at the company. He was one of the 800 RedHat employees that were laid off following the announcement of Matt Hicks, CEO of RedHat, that the company is planning to lay off around 4% of its 20,000-strong workforce. Writing a letter to the employees, Hicks said that the company will reduce the associate base of Red Hat over the next few months. “Our reductions will focus on general and administrative (G&A) and similar roles across all functions and represent a reduction of just under 4% in total. We will not reduce roles directly selling to customers or building our products,” said Hicks. While the nature of layoffs is not clarified, Hicks did say that the company is not going to reduce roles directly selling to customers or building the company’s products. The recurring issue at hand is the decrease in IBM’s stock value, which can be attributed to the acquisition of Red Hat in 2018. The acquisition has burdened IBM with debt, causing analysts to view IBM’s worth in the context of the Red Hat purchase. Although IBM has made progress in paying off some of the debt associated with the acquisition, this still affects analysts’ assessment of IBM’s value. Given the current environment of rising interest rates and numerous investment options, the market does not anticipate an upward trend for IBM and is seeking a price point in the double digits to generate interest. However, insiders say that the decision is unlikely to be influenced by IBM. “From what we were told this morning, this is a purely Red Hat decision not influenced by IBM, primarily intended to reduce our spending and save cash in light of the increased cost of money caused by rising interest rates,” said one user on a public forum. In other news, it has been reported that the positions impacted by recent layoffs are classified as “general and administrative” roles, in accordance with Generally Accepted Accounting Practices (GAAP). However, users on Reddit indicate that those individuals directly involved in product development and sales, including software engineers and sales staff, are not affected by the layoffs. The recent news has left many disappointed, as there was hope that IBM’s acquisition of Red Hat would lead to the former adopting the latter’s culture. However, with support personnel such as HR and Recruiting being made redundant, and equivalent staff at IBM taking over, the chances of Red Hat assimilating into IBM’s culture are higher than ever. As one Reddit user laments, “Now the gatekeepers that brought in new Red Hat people are going to be looking for IBM types. Slowly, the culture will change.” Another user expressed a similar sentiment, saying, “I had hoped that this merger would result in Red Hat effectively taking over IBM and replacing IBM culture with Red Hat culture, but it looks like instead, Red Hat is dissolving into IBM.” However, it’s worth noting that IBM is not directly influencing Red Hat, nor is it immune to Red Hat’s influence. As one user pointed out, they worked with Red Hat’s CEO, Paul Hicks, for nearly a year before he assumed his current position. They also worked at IBM before the acquisition. The user notes that “IBM continues to become more fluid and agile as RH influences us and Red Hat is getting better at execution as they learn from us.” Furthermore, the user claims that “IBM software is now almost wholly dependent on OpenShift. IBM is getting OpenShift into places it could not go before, and Satellite is making it much more manageable than before. IBM is managing 10,000 OpenShift clusters per SRE, and it continues to scale.” The recent wave of layoffs is a direct consequence of the company’s decision to revamp its performance evaluation and bonus payout system, announced in the previous quarter. This move has created a situation where managers can easily undervalue employees. According to a Reddit user, the company is paving the way for a future where it’s easier to lay off allegedly “underperforming” workers, while simultaneously labelling average workers as underperforming or performing workers as average. The 4% layoff figure cited by the company is significantly lower than the 10% to 20% layoffs implemented by other tech firms. While some may view this as a sign of Red Hat’s progressive nature in trying to keep layoffs to a minimum, others may see this as just the first round of layoffs. Therefore, it’s possible that the company is closely scrutinizing employee performance during the second quarter, and this may be the time for employees to shine.
The 4% layoff figure cited by the company is significantly lower than the 10% to 20% layoffs implemented by other tech firms. While some may view this as a sign of Red Hat’s progressive nature in trying to keep layoffs to a minimum, others may see this as just the first round of layoffs.
The 4% layoff figure cited by the company is significantly lower than the 10% to 20% layoffs implemented by other tech firms. While some may view this as a sign of Red Hat's progressive nature in trying to keep layoffs to a minimum, others may see this as just the first round of layoffs. 
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You can reach me at: lokesh.choudhary@analyticsindiamag.com.