Big Blue spinout eyes up to $500M in savings and agentic AI while insiders grumble it's still 'IBM without the hardware'
EXCLUSIVE Kyndryl – the global technology services division spun out of IBM in 2021 – is cutting jobs to reduce overheads and "streamline our operations" in several countries.
The business is this week entering a 45-day consultation with employees, where local law requires, under what insiders described as "workforce rebalancing," a euphemistic term that invariably means redundancies.
Sources at the IT services biz told us more than 150 managers were called into an extraordinary meeting with HR on Monday. Personnel earmarked for redundancy will have meetings on Wednesday and an announcement is expected on Friday.
The cuts are expected to affect delivery teams, with hundreds of people likely to be placed at risk of redundancy in the UK alone. "We had 150-plus [managers] in the call so it's basically everyone in every department who is an architect, consultant, subject matter expert," said a source.
"Kyndryl employed loads of new VPs and they are not affected, just cutting the real workers. I do not know how the company will last with a significantly reduced delivery [capability]."
The 45-day consultation, a requirement under UK law, indicates at least 100 staff will be at risk of losing their role, although no figures have been confirmed by Kyndryl. According to UK accounts for fiscal 2025, Kyndryl's UK arm employed 1,303 people in the year to March 2025, up from 1,232 in the prior year.
A Kyndryl spokesperson told The Register: "As we continue to transform our business in support of serving our customers and sustainable growth, we expect a limited workforce rebalancing in some countries affecting a small percentage of our workforce to address labor costs and streamline our operations."
The job cuts will not surprise anyone following Kyndryl. Interim chief financial officer Harsh Chugh, who came into the role in February when the permanent CFO departed amid a board review of accounting practices, warned of changes ahead during the company's earnings conference call earlier this month.
Chugh said Kyndryl was taking $200 million of "charges associated with the workforce rebalancing actions, which we expect to incur substantially in the first quarter of fiscal 2027." Kyndryl's 2027 financial year began on April 1.
"These actions are expected to yield annualized savings in the range of $400 million to $500 million in fiscal 2028. With the expectation that most of the charges will take place in the first quarter, we expect our first quarter adjusted pretax income to be a low point in earnings for the year with meaningful profit improvement expected for the remaining nine months of the year."
According to fiscal 2026 financial results, Kyndryl's sales stagnated: revenue of $15.092 billion was largely flat against the $15.057 billion reported in the prior 12 months. Selling, general, and admin expenses went up by $63 million to $2.654 billion. Net profit shrank 21 percent to $198 million.
During the conference call, Kyndryl chairman and CEO Martin Schroeter said the company is "taking workforce rebalancing actions to yield meaningful savings."
"We're confident in our strategic direction and our financial position remains strong. We believe our focus on higher-value services, coupled with the actions we're taking to streamline our own operations, positions us to navigate the evolving ways our customers consume IBM's innovation while keeping us on track toward our multiyear objectives."
Not all staff share that level of self-assurance. One insider told The Register that Kyndryl is too reliant on "big whales" – meaning too few big-ticket legacy contracts. The source claimed Kyndryl tends to jump onto the latest crazes, including agentic AI, when its real strength is in classic infrastructure services.
"Despite all the bluster, we are really running IBM but without the hardware," one told us. "I'm tasked with getting X number of accreditations from my teams whether they are useful or not and spend too much of my time having strategic meetings about strategy plans and plays that don't come off."
Kyndryl was formerly IBM's Global Technology Services division, minus Technical Support Services. It was an area that suffered revenue shrinkage and mounting financial losses in the years before it was spun out.
Some 90,000 employees moved from IBM to Kyndryl in November 2021. As of this month, it employed 73,000 globally.
Schroeter and his management team have tried to convince shareholders of the way forward – a future steeped in cloud services and AI. The share price peaked at $43.41 in July last year but has since tumbled to $12.26, hit badly by an accounting issue pertaining to cash management practices. ®