IBM Purging The Old Guard, More Unofficial Layoffs

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Any other company in this age of litigiousness would be suspect, perhaps for alleged age discrimination.  Fortunately, IBM has been in enough lawsuits that the wording, terms and coercion are carefully crafted and legally reviewed……Heck, we couldn’t use the word monopoly in any press release decades after the monopoly lawsuit.

Here it is ->

IBMers who are qualified to apply are:

• Employees who received a satisfactory or higher performance rating in 2011
• Employees who participate in IBM pension plans currently or by Jan. 1, 2014
• Have met the criteria of at least 30 years of service regardless of age
• Are at least 55 with 15 or more years of service
• Or are at least 62 with five or more years of service
• Or are at least 65 with one year of service
• More recently hired IBMers who participate only in IBM’s 401k “Plus” plan if they are age 62 as of Jan. 1, 2014

I know a lot of folks who fit in this class. They are smarter and wiser than those who will be filling their shoes.  In some cases, they are some of the smartest people in IBM like Rod, Jeff and maybe even Bob.

This has the outward appearances of a Wall Street promotion.  Stocks have a tendency to rise when companies announce anything tantamount to layoffs and as I detail later, IBM seems to be focusing on EPS more than innovation.

HOW TO MASK ANY DISCRIMINATION

This program is made “voluntary” with a guarantee of no RA or resource action (being fired in IBM speak) if you promise to retire in 2013 (loads of part time work).  You can logically deduct that there will be more people RA’d as predicted a while back here and here (as far back as February).  You can bet there is a slice of this population that will benefit from this as they would have been RA’s later this year.  The alternative is that a major division such as GBS or GTS which both are treading water could be sold off.

It’s roots go back to the FAP (financial assistance program) back when Gerstner took over and got rid of all the dead weight roaming the halls of IBM (which may be why they are doing it again).   Give them enough money to leave and be quiet and you can dump any crowd you target.  Most people rarely get this good of an out, so watch the IBM passengers jump the ship like it was sinking.

IT’S WHO IS LEAVING THAT IS IMPORTANT

Remember that at the end of the day, IBM is still a mainframe company despite the barrage of services and software messaging and reporting…..their job is to service the mainframe .  Most of the software they sell is for the mainframe as it is “middleware”.

Over 40% (48 I think is the number so almost 50%) of Systems and Technology Group (STG or the Mainframe group) are in this retirement category.  That means those with all the knowledge of how stuff works is leaving.  Sure there will be a lot of youngsters who can tweet, but veteran VLSI chip designers and circuit board layout engineers for the next Cloud server are gone.

This means the will have to hire back the folks that know what is going on, or know how to program in COBOL.

WHAT HAPPENS WHEN THEY ACCEPT THE BUYOUT?

Nothing.  That’s right, even for the most conscientious of employees, people are going to stop working with them so it is a vacation the rest of the year.

You see, IBM is a place where you call around to get someone else to handle some or all of your work especially in an emergency (it always is when Ginni says get it done which gets thrown around in vain now).  If first choice (the person in charge of the product) is not available, you move on to the next likely source until you get someone to take on the task.  When you know a person is only in for 3 days a week, you stop going to them as the pressure is so high that to get your job done you will go elsewhere.  This of course puts the burden on everyone else to do more with less knowledge, hence a job done worse or you get time back due to not enough people to hold the meeting ;-)

THE PENSION PLAN

A while back, if you did not have 20 years of service, you got moved off the pension plan (the gravy train) and onto a cash balance plan (401k with your money and a little bump from IBM) to placate any hint of discrimination, an event which can clearly be tied to this announcement.

I got a letter from IBM that said the plan was only funded to 88% this year.  They need to get people off this plan so IBM is not required by the government to make it 100%.  While it is an off balance sheet item for now, it still is a liability.

IT ALL COMES DOWN TO THE 2015 EPS CLAIM

IBM made a prediction that it will pay $20 EPS in 2015.  I believe it will with this announcement.  Older workers make more, have more costly healthcare and can’t be persuaded to work 100 hours a week as easily as millennial’s.  You have to make sales, tough in this economy or cut expenses.  Payroll (including benefits) is a big number on any company’s financials, so this is a good place to drop the knife.  Nothing stands in the way of this number.

They are going to buy back $7 billion in shares, get rid of expensive employees and cut to the bone any group that isn’t highly profitable and bingo, $20 it is tattooed on the backs of the employees known as Roadkill 2015.

Conversely, if you read the book by Thomas Watson Jr., he quoted that his father (founder of IBM) always hired in times of trouble so he could be ready for the time things turned around.  I’m trusting that IBM will make a move to hire a lot of new graduates to work in the USA as replacements.

WHO GETS HURT

The Customer, period. (editors note: the employees that make it to 2015 except those in the NY club get it also)

Cut out the product knowledge and you have marketing messaging for your products (Smarter anything is the nom de Jour). You’ll see innovation suffer due to this talent drain.  There are really smart people at IBM and I’m sure there will be more, just without the benefit of the person who blazed the trail).  When you let the bean counters make the decisions for the future, cutting expenses is the goal.  Perhaps, IBM will find the next Mark Zuckerberg to work for Big Data?

So expect some letdown in quality and surely morale, just like the rest of the industry (prediction, Apple’s next product will be google wave or plus or Newton capable).

In a way, this even’s the playing field and will be fun to watch unless Oracle, Google, Microsoft and HP can screw up worse.

BIGGEST LOSS OF ALL?

Steve Mills has been there over 30 years and qualifies.

UPDATE

It seems that for those who qualify, this is a wildly popular program.  It is a once in a lifetime (for most) to get paid to leave and work less in the transition while planning your retirement.  There is some high fiving in the hallways knowing that the light at the end of the tunnel just got brighter.  They say it’ll be one big long vacation for the old timers to end their career.

Is Steve Mills Running IBM?

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To start out this article, IBM just reported the smallest earnings growth since late 2009.  IBM should be scouring the land for the next Lou Gerstner.  I know there are a few internal executives getting in line for the next changing of the guard, but they are a mediocre crop at best.  My experience is that they are bunch of screamers and schemers with large ego’s (except around Steve).  I don’t know how they are going to make the 2015 earnings commitment, but I will project pain for employees getting there.  They will also have to buy back a shedload of shares (which just happened after I wrote this) to make the numbers or kill employee morale as noted in the turnover rate getting there

WHO IS REALLY RUNNING THE PLACE?

While Ginni Rometty is the new President it still seems like she is a front (wo)man while the person that holds the keys to the company’s operations is Steve Mills.  He of fame for building the software business, the part of the company that keeps it profitable.   If she can just keep the company from getting in trouble circa the Akers years, she’ll stay out her welcome.  Any hiccups won’t allow her to finish at 60.  One of the hiccups is that it will be hard to do it without Mills.  She fit the diversity model (which really isn’t that great at IBM when you consider how many who abuse the system) and she is polished and was fit.  The internal grapevine mentions her name in triviality that never was even thought of in the Gerstner/SJP years with her name being thrown around in vain to get something done.

I have witnessed Mills at work personally, watching him dust off General Manager’s who thought they were important, address Wall Street, IT analysts, reporters and various other constituencies, it was clear who is holding things together.   It appears he lost out in the age game for the President position, but he was the right guy.

He runs both the most profitable division and is now trying to save the dinosaur businesses for IBM, those being Software Group and Systems Group (servers mostly, and mainframes mostly).

SERVICES

First, let’s take Services out of the equation.  Not to mention that IBM is blowing it by firing the wrong employees.

Services is low margin/high volume was essentially flat in first quarter so while it is important to IBM (if you include Global Financing and you have a much worse number), it is almost a legacy now and is not the growth engine it once was.  It provides a needed pipeline of business to service (sorry) HW and SW sales, options competitors don’t have or try to copy with varying degrees of success…. too bad that ship sailed years ago.  It is neither the mainframe model nor future for the company as the industry changes, but it does provide top line numbers crucial to financial statements.

SOFTWARE AND HARDWARE

Software was up as usual as that is the model and umbrella for the future.  It is a high margin business as long as you remember a caveat.  Let’s be clear that upwards of 80% of the IBM software is sold for the System Z or “The mainframe”.  Conversely, the mainframe business (let’s quit messing around with the Systems Group moniker here) is down a lot.  Guess who is going to catch hell and budget cuts this quarter.  Because the economy is down around the world, these numbers are down. I’ve got news for the industry, it will not turn around next quarter or next year.  Growth is 5-10 years away and who knows which company will be in the drivers seat for that timeframe.

As stated earlier, Mills is approaching 60 which as far as I can see was the deal breaker for him becoming the next president.  No one other than Palmisano understood the company as well and as long as Mills does.  He also knows where the company should be.  He’ll get to go out on his terms, but IBM should make him stay on for another 5 years to keep things going until the world economy and job market turn around.  He is the glue that keeps things together and would be a bigger loss to IBM than even Palmisano was, because that one was so orchestrated.

EARNINGS

IBM  has laid out a plan for investors which makes it a top IT company.   Much of this based in belief of the endless story of Big Data (and cloud, but who cares about software delivery, we’ve been doing that in different ways and will continue this trend by calling it something new soon).  It has much upside, but will not save a company by itself (diversifying is something IBM has done better since almost committing hari kari in the 80′s-90′s).  However, there is always a bigger fish in the IT sea.  Will  Watson be the next big thing?  Name me any huge sales of a Watson unit.  It is an ingenious marketing plan that shows IBM can do something others can’t.  In reality, only the top Data consumers can afford a real Watson and the army of IBMers to keep it running as  it is already a product with the name System P and fancy software (see an Analyst Group who defines IBM Here).

MAKING MONEY

You make money by increasing sales and/or reducing expenses.  Guess what, revenue was just discussed and sales are going to be tough for a while.  300-400K employees are tough to keep employed in this situation.  This means new rounds of layoffs, travel restrictions, expense cuts and other austerity measures are on the way before 2015.  Keeping them happy will be next to impossible without turnover. It appears that the employees are mocking the new system too with the 2015 projections internally code named Road Kill 2015.

These are tough times and even if you’ve cornered a portion of the market such as Apple right now, you are just another fish in the sea, and never the biggest.

The man who has been tested for these tough times is Mills.  Underneath, I think he’s running most of the company which for their benefit he should be doing rather than planning his retirement.

Bottom Line: There will be a big hole to plug when he leaves and life is going to be a lot harder for Rometty as the Mills replacements are OK at best.

2010: It’s SILLY TO CHALLENGE OBAMACARE

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From Don Surber on a history lesson:

From Iowa Attorney General Tom Miller and then-Ohio Attorney General Richard Cordray on April 2, 2010:

Nobody can seriously argue that the health care industry operates only in “intrastate” commerce and that the mandate provisions in this bill cannot be effectively disentangled from the comprehensive economic approach that Congress adopted to fix the deep flaws in our current health insurance system.

We live under mandates every day. Without them, society as we know it would disintegrate. Every criminal law tells us what we cannot do.

And sometimes the law tells us what we must do. Congress can require young Americans to register for the draft to serve in the military, for example, or can require us all to pay taxes for programs like Social Security and Medicare.

We can — and do — argue about what shape these laws should take, without claiming that our leaders are constitutionally barred from dealing with our most pressing problems.

Instead of pursuing lawsuits, we should work to find ways to improve the lives of the American people and protect our four most fundamental freedoms: of speech, of religion, from want and from fear.

Freedom from want and from free. It’s in the Constitution, alongside the right to sing the blues.

From Jonathan Cohn on April 24, 2010:

Most legal experts seem to think the lawsuits won’t succeed. Among other things, it turns out that the U.S. fought a large war, about a hundred and fifty years ago, in order to settle the issue of state nullification. But if the officials filing these suits seem not to understand that history–or at least, not to care about it — their opposition to the Affordable Care Act, like their supporters’, seems genuine. If they had their way, their states really would reject the new health care law.

You see, opposing Obamacare makes you part of the Confederate States of America and that makes you a racist.

For shame.

From Randy E. Barnett on March 21, 2010:

Can Congress really require that every person purchase health insurance from a private company or face a penalty? The answer lies in the commerce clause of the Constitution, which grants Congress the power “to regulate commerce . . . among the several states.” Historically, insurance contracts were not considered commerce, which referred to trade and carriage of merchandise. That’s why insurance has traditionally been regulated by states. But the Supreme Court has long allowed Congress to regulate and prohibit all sorts of “economic” activities that are not, strictly speaking, commerce. The key is that those activities substantially affect interstate commerce, and that’s how the court would probably view the regulation of health insurance.

There you have it. Constitutional. Now go away.

You are still there? OK, read this slowly — without moving your lips.

From the Atlantic Wire on March 23, 2010:

Why court challenges will fail

Mandates Are Constitutional. The Daily Beast’s Adam Winkler defends the Constitutionality of the mandate. “Because the individual mandate is a tax provision that promotes the general welfare, it is within Congress’ taxing power. This is one of broadest grants of authority the Constitution gives Congress.” He quips, “In fact, the Founding Fathers themselves included an ‘individual mandate’ in a law way back in 1792.” They wrote a law requiring “free able-bodied” serve in militias–with a gun they had to buy on their own.

Courts Give Congress Power Here. The New York Times’ John Schwartz writes, “The broad extent of the government’s power to regulate interstate commerce has been recognized since the Roosevelt administration. In fact, courts have backed Congress’s ability to regulate under the Commerce Clause of the Constitution, even when the issues might not seem, at first blush, to even involve interstate commerce at all.”

Can’t Be Challenged Until 2014. The Washington Independent’s David Weigel reports, “The problem with a challenge, say conservatives, is that the mandate for health care — an idea with origins on the right that has become anathema ever since its implementation in Massachusetts — will not take effect until 2014. Whether attorneys general can successfully challenge the mandate until then is unclear.” By then, the anti-health care fire will have died down considerably.

Winning Isn’t the Real Reason To Challenge. The Atlantic’s Marc Ambinder says conservatives get it. “The chances of success in the Supreme Court are low, but the point of the lawsuits isn’t legal — it’s political. It advances the politics of conservative jurisprudence, and the political ambitions of conservatives, and it keeps the legislation itself in a state of suspended political animation.”

Got that last one? They see through you. This is not about a legal case. This is about politics. Embarrassing the president.

You are doomed. Doomed. Surrender Dorothy.

AND THIS DOOSY:

From Frank Rich on March 27, 2010:

When Social Security was passed by Congress in 1935 and Medicare in 1965, there was indeed heated opposition. As Dana Milbank wrote in The Washington Post, Alf Landon built his catastrophic 1936 presidential campaign on a call for repealing Social Security. (Democrats can only pray that the G.O.P. will “go for it” again in 2010, as Obama goaded them on Thursday, and keep demanding repeal of a bill that by September will shower benefits on the elderly and children alike.) When L.B.J. scored his Medicare coup, there were the inevitable cries of “socialism” along with ultimately empty rumblings of a boycott from the American Medical Association.

But there was nothing like this. To find a prototype for the overheated reaction to the health care bill, you have to look a year before Medicare, to the Civil Rights Act of 1964. Both laws passed by similar majorities in Congress; the Civil Rights Act received even more votes in the Senate (73) than Medicare (70). But it was only the civil rights bill that made some Americans run off the rails. That’s because it was the one that signaled an inexorable and immutable change in the very identity of America, not just its governance.

The apocalyptic predictions then, like those about health care now, were all framed in constitutional pieties, of course. Barry Goldwater, running for president in ’64, drew on the counsel of two young legal allies, William Rehnquist and Robert Bork, to characterize the bill as a “threat to the very essence of our basic system” and a “usurpation” of states’ rights that “would force you to admit drunks, a known murderer or an insane person into your place of business.” Richard Russell, the segregationist Democratic senator from Georgia, said the bill “would destroy the free enterprise system.” David Lawrence, a widely syndicated conservative columnist, bemoaned the establishment of “a federal dictatorship.” Meanwhile, three civil rights workers were murdered in Philadelphia, Miss.

That a tsunami of anger is gathering today is illogical, given that what the right calls “Obamacare” is less provocative than either the Civil Rights Act of 1964 or Medicare, an epic entitlement that actually did precipitate a government takeover of a sizable chunk of American health care. But the explanation is plain: the health care bill is not the main source of this anger and never has been. It’s merely a handy excuse. The real source of the over-the-top rage of 2010 is the same kind of national existential reordering that roiled America in 1964.

You see it? You teabaggers are doomed — doomed — and you will kill black men out of your misplaced anger.

 

So there are some views from the past.  What will happen with the SCOTUS ruling?

 

 

RIM – RIP

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Update: RIM at a new low, sort of proving the following is on track.

Rarely do I write about the technology that I replaced because I’m usually so excited about the replacement.  In this case I’ll make an exception.  I already wrote about my new phone, but as much as I wanted the new phone, getting rid of my blackberry was more important.  Rob Enderle reminded me of this in his tech trends blog.

At a Lotusphere show not too long ago, we did an announcement with RIM and Notes (it was an announcement of a product we were going to release at a later date).  Not only was I underwhelmed by the product, the hardware and software technology from RIM was as cool as mud huts compared to new construction.  On top of this, when I offered to help the RIM executives for gratis, they had an attitude that belied the fact that they already had iPhone daggers fatally in their hearts and didn’t even know it. It now looks like it’s going to cost them their jobs.   I was treated as if I was dust (I’m being nice to them) by their executives.  Notes was almost impossible to use on a blackberry at first.  It made it to a D- at best.

I knew then that not only was RIM in trouble as a company, I disliked the blackberry as a piece of technology almost more than any I’ve had in 30 years.  I saw the crackberry addiction it caused in some folks which I didn’t like.  I also saw that if you had a blackberry (before iPhone days), you just signed up for a 24/7 availability.

The first one I got for free, and promptly got rid of in a month as it was more trouble than it was worth.  The last one I’ll ever have is because my then company had me get one when I wanted a real phone/data device instead.

My problem is solved.  Too bad about RIM…their once leadership position is now only a memory with recent market share decline.

It looks like I’m not the only one who believes they are in trouble.  Their Board is not helping out either.

Sales figures show the same decline.  It was not even nice knowing you.

So throw the Blackberry on the technology rubbish pile along with the Palm, OS/2, Token Ring, Newton and a host of others.

Microsoft, Being Chipped Away by Google, Apple, Everyone

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Every time a company comes up with a good idea, another company finds a way to one up it.  Patents, trademarks, copy-writes  or any other legal means don’t stand in the way of a better idea.

This also works when you don’t have a better idea, but your product still dominates the market, mostly due to better marketing.  Yes, there is a good percentage of people don’t think Windows is a good product.  Most have experienced the Blue screen of death. Booting takes forever, drivers, compatibility, price and any number of factors make it a product that is only doing well because of marketing and the force of Microsoft.

Apple OS, Linux and even OS/2 were or are better operating systems.  Now the Chromebook is out.  I won’t pontificate as to whether it is better or not, but it will take share away from Windoze as the OS of choice.   There are many Google lovers or users out there and for the price of a Chromebook, you could only get Windows 7 from Microsoft.

I’ve often said that Microsoft will have to pull an IBM by re-inventing itself, but their phone OS, gaming, MP3 players and Office haven’t really done the trick.  They are are the quintessential one trick pony.

Time will tell what will happen, but the introduction of the Chromebook is just another layer of the onion being peeled away.  Good thing they have a lot of cash in the bank, because they will need it to buy a better product.  They sure haven’t invented one……ever.

Analyst Predictions for 2010. Everyone is Going Out On Basically The Same Limb

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I’ve been keeping track of the analyst predictions waiting for enough time for them to post a listing of them.  I think that since it is the last day of 2010, and that there is a sufficient amount of them out there, it is time  to list them. Analysts are the prognosticators of the IT Industry and they should be right, but then meteorologists tell us about the weather, and they are great if they are only 50% right.  In reality, they can’t tell us what next week will really be and yet we are basing many decision on what 20 years from now will be.  I’m trusting that IT analysts are more accountable and have more tangible facts less subject to acts of God than the weather.

In reality, Carter Lusher and SageCircle is where you should go to get your A/R best practice as to what to do with these predictions, but I have to make some calls of my own.  Here is what I’m going to use the predictions for in addition to Carters recommendations:

  1. Use it as the basis for discussion with the analyst showing that I have been reading and following them.
  2. Using them as analysts to select for briefings and consults based on their area’s of concentration
  3. Good natured ribbing if they really blow it at the end of the year. (note: not necessarily an A/R best practice here)
  4. Use it as part of my A/R plans to present to the executives I support.

So here is my listing.  I’ll note that they are in no particular order as I’m getting them from my feed reader as they come  up.  I like and work with almost everyone on this list, so I am not going to show favorites in a listing order, it will be entirely random.  You will note a trend very quickly as to where most of them are going for the year.  See if you can pick it out.

Analyst Predictions for 2010

IIAR video of Gideon Gartner on the state of the IT Analyst Industry.  (Note that this is not a part of the trend, just that it came up first).

IDC Webcast by Frank Gens, Robert Mahowald and Henry Morris. It has a link to the video which is worth watching, but the theme begins here with the discussion of the Cloud.  I’m glad they consider the Hybrid model.

Laurie McCabe of Hurwitz Associates and her 2010 Top 10 SMB Technology Market Predictions. At least she waits until number 7 to get to Cloud, thanks Laurie.

Bruce Tempkin of Forrester discusses Gen Y.  While not really a 2010 prediction, there is no denying the fact that the attitude, social media ability of Gen Y’rs and their length of patience is a big HR issue we all face.  They will help define the workforce make up as boomers exit.

James Governor of Redmonk leads the list with 20 predictions.  Note the continuation of the trend as James has Cloud at numbers 1 and 12.  I admire him for also considering the hybrid model as the cloud is not one size fits all.  As I work with James quite a bit, I’m surprised to see Google and Green further down the list than I expected.

Carter Lusher reprimands the A/R Community to pay attention to Social Media or suffer the consequences.

Amy Wohl and you guessed it, 2010 Predictions on SaaS and the Cloud. Note the build up in the trend.  I still swear to random selection, but Cloud is getting a lot of attention.

Judith Hurwitz titles her predictions as: Predictions for 2010: Clouds, mergers, Social Network and Analytics.  I’ll give her credit for the Social Networks as I delve there in my predictions also.

Claire Schooley again talks about Gen Y.  While not an official 2010 prediction, there is no avoiding that we’ll  have to address the issues of this culture in the  workplace.

Rob Enderle in 2008 on 2009 highlighting Security. I’m including this as Security becomes an issue with the uptick in terrorist activity, both online and direct attack like flight 253.

Jonny Bentwood also covers this topic in his yearly round up. He actually gets to it first and we cross over quite a few, but I’m not going to use everything in his list so that you have a reason to to there and check out additional predictions I’m not covering.

Lee Odden’s 12 Digital Marketing Predictions. There is a lot of good Social Media info here to look at.

Rob Enderle checks in again with one of my beliefs, that the Private Cloud will Win over the Public Cloud Model. Anybody picking up the Cloud trend in predictions yet?

John Levitt from AnalystXpress on the Top 10 Wireless predictions for 2010. Of course Cloud makes number 3.

Chris Collins of Yankee Group posts a Webinar on 2010 predictions.  Cloud Computing is a tag needless to say.

David M Smith of Gartner discusses the Psychology of Predictions, a different way of looking at it starting with caring about being right.

Ray Wang and Jeremiah Owyang discuss what’s coming to 2010 in a video with Robert Scoble.

UPDATE: Laura Cecere and Alan Johnson Of AMR have come to the table with another set of predictions.  You need to be an AMR client for this one.  Here is a link to their press release.

2010 Client Virtualization by Benjamin Gray

So between my list and Jonny’s list, you have most of the predictions for 2010.  Will the analysts be as good or better than the weathermen?  Only the Shadow knows.

My Turn at Making Predictions

Since I’m listing others predictions, it’s only fair that I put out my own.  Disclaimer: I’m not an analyst, so I don’t feel any need to get to 10.

1. The Cloud is important, although I think the hybrid and private models are more important than the all everything public model

2. Twitter will continue to erode the number and quality of good bloggers.

3. We need to find a new Twitter as the current model has now been compromised in security, and there are just too many people on.  We need another back channel to connect with our real business contacts.  Plus, I’m an early adopter, so let’s find that new best method.

4. All predictions go out the window if there is another Terrorist attack.  The top prediction will be Security.

5. Success in the economy will be defined as less of a loss than we expected.

6. Who you hire from Boomers to Gen Y matters to your ability to connect to the tech crowd when considering hiring practices.

Final note.  At some point this year, I’m moving Delusions to a new host.  Mine is bad so obviously I’m publshing on a back up blog.  Stay tuned for that .

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