Earlier in this series, we discussed IBM’s (IBM) plan for hiring and training employees. Revenue per employee roughly indicates how much revenue a company is able to generate from an employee. Therefore, it is seen as an indicator of efficiency. Tech companies’ revenue per employee including IT service vendors is usually higher than other sectors’ revenue.
For instance, Walmart’s (WMT) revenue per employee is approximate $220,000. General Motors’ (GM), revenue per employee is around $700,000. Apple’s (AAPL) revenue per employee is $2.1 million, whereas Facebook’s (FB) stands at $1.4 million, as reported by Statista.
This difference is because of tech companies’ smaller employee base. We know that employee costs are a significant expenditure for technology companies. As a result, technology companies often resort to layoffs to keep control of costs. Also, tech players keen on cost optimization aim to maximize revenue per employee.
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The above chart by Statista shows the ranking of tech companies in terms of revenue per employee. IBM leads in this metric among IT service peers.
The SMAC (social, mobile, analytics and cloud) revolution has also pushed the tech sector to layoffs. As cloud and mobile adoption increase, tech companies are driven to improve IT (information technology) efficiency and enhance their domain expertise.
In early 2016, ValueWalk reported that “70% of the current work which requires Back Expertise, Products and Services is going to get reduced to 30%.” This seems to be the case with IBM, which, after announcing layoffs in April 2016, claimed to have 20,000 open positions, according to the Wall Street Journal.
As IBM transitions from its traditional offerings to the cloud, it is letting go of employees associated with these business segments. On the other hand, the company’s focus on its Strategic Imperatives segment is creating job opportunities, as visible by the vacant positions it has in cybersecurity, cognitive computing, AI (artificial intelligence), and data science, as we saw earlier in this series.