CASE STUDY I-2 Telecommuting at IBM-Indiana

CASE STUDY I-2
Telecommuting at IBM-Indiana

International Business Machines Corp. (IBM), a leader of the
computer revolution, became one of the outstanding success
stories of the second half of the twentieth century. By the 1970s
IBM had about 70 percent of the computer market and was
highly respected for its progressive management and its integrity.
A pioneering multinational, IBM operates worldwide and typically
derives over half its revenues from outside the United States.
Up through the early 1980s, IBM continued spectacular
growth, but it also became more bureaucratic and slow-moving.
Soon after career IBMer John Akers took over the helm in 1985,
IBM’s profit margins began to slip, and it became obvious that
IBM faced a troubled future. Over the years Akers downsized
IBM from over 405,000 to around 300,000 employees worldwide, attempted to focus IBM more on the needs of its customers, reorganized the company twice, cut IBM’s product
development cycle time in half, and replaced most of the IBM
product line with very competitive hardware. However, IBM continued to lose market share and profit margin and had unprecedented losses in 1991 and 1992. (See Exhibit 1.) Furthermore,
IBM stock dropped from $176 in 1987 to $49 in 1992. In early
1993, Akers resigned and the IBM board decided that an outsider was required to turn IBM around.
After much speculation about possible candidates and a
widely publicized search, Louis V. Gerstner was named IBM’s
CEO. Gerstner had started his career with McKinsey & Company,
joined American Express and rose to its presidency, and in 1989
he was hired as CEO by RJR Nabisco Holdings Inc. to lead a
recovery after a takeover battle that saddled that company with
$25 billion in debt.
Concentrating on downsizing and customer service,
Gerstner targeted IBM’s worldwide employment at 225,000, to
be achieved by the end of 1994, and told IBM employees: “I
start with the premise that our customers are looking for us to

Copyright © 2001 by E. W. Martin. This case was prepared as the
basis for class discussion rather than to illustrate either effective or ineffective handling of an administrative situation. Its development was supported by the Institute for Research on the Management of Information
Systems (IRMIS), Kelley School of Business, Indiana University.

164

deliver solutions to their problems. So we’ve got to get back to
delivering superior solutions to our customers.”

The Telecommuting Project
In June, 1992, Michael W. Wiley became general manager of
IBM’s operations in the state of Indiana. Wiley was a secondgeneration IBMer who started as a salesman in 1980 and
moved rapidly up through increasingly responsible staff and line
marketing jobs to become administrative assistant to Senior
Vice President George Conrades before taking over in Indiana.
During 1992, IBM continued to downsize and Indiana
reduced its head count by about 30 percent. In 1992, IBM had
its worst overall financial results ever, and word was out that
Indiana faced the prospect of similar head-count reductions in
1993. In February, 1993, John F. Frank, new operations manager for the state, made his first visit to the new IBM building in
Evansville that was part of his responsibility. Frank recalls:
It was a gorgeous new building looking out over the Ohio River,
and we had just moved into it in May, 1991. Although IBM did
not own it, it had been built for IBM and was one of the most
expensive buildings in Evansville.
That Tuesday, this beautiful building was virtually empty. I
looked across a big room full of desks of marketing people, who
were all out talking to customers, and I could have shot a shotgun
in any direction without hurting anyone. I was shown through
beautiful conference rooms and classrooms, most of which were
empty. I couldn’t figure out why we had all this space that must
have been costing us a fortune. It wasn’t just the real estate cost,
but also the occupancy costs—the information technology, support staff, utilities, taxes—that were killing us. So I spent my time
on the plane on the way back making a rough estimate of what it
was costing us to run all the IBM buildings in the state of Indiana.
When I got home at 9:30 P.M., I called Mike Wiley and told
him that I thought we could save a minimum of two of three million dollars in Indiana in the first year, and three to four million a
year from then on, by reducing our real-estate costs. After I went
over my rough figures with him, Mike said, “Let’s make it happen!”

When Frank called, Wiley was preparing for a meeting in
Chicago with the Midwestern Area vice president and his

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EXHIBIT 1
IBM Ten-Year Revenues and Income (in millions) and Stock Prices (to nearest dollar)
1992
Revenue
Operating Income
Net Income
Stock Price (high)
Stock Price (low)

1991

1990

1989

1988

1987

1986

1985

1984

1983

64,523
8,199
(6,865)
101
49

64,792
9,489
(564)
140
84

69,018
15,249
6,020
123
95

62,710
13,553
3,758
131
94

59,681
12,617
5,491
130
104

54,217
11,269
5,258
176
102

51,250
11,175
4,789
162
119

50,056
14,281
6,555
159
118

45,937
14,446
6,582
129
99

40,180
13,216
5,485
134
92

counterpart general managers to talk about how many headcount reductions would be required to meet the area’s profitability targets. Wiley recalls:
With our strategy of providing value to the customer by solving
problems, the last thing I wanted to do was to eliminate more
people. We solve problems with highly skilled, highly specialized
people, and I was convinced that we should cut everything else
before reducing our competitive advantage by cutting productive
people. So when John called me with his idea of saving big
money by reducing facilities costs, I told him we had 3 days to put
together a proposal to take with me to the meeting in Chicago so
that I could present it as an alternative to cutting people.

They put together a team consisting of Wiley, Frank, and
the chief financial and chief information people for Indiana.
Frank recalls:
We spent 36 hours straight putting the plan together. When I
made the proposal I knew a little about telecommuting, but I
didn’t know much about the details. It was late-night trips to the
library researching what other companies were doing that prepared us to put together a rough plan. This plan called for
reducing our real estate in Indiana by 65 percent by moving all
of our client-related personnel out of the traditional office environment into offices in their homes.

IBM-Indiana’s proposal to substitute telecommuting for
head-count reductions was accepted by Midwestern Area management. This proposal would not affect people whose main
workplace was an office. Rather, only IBM people who spent
most of their time with customers and worked in their offices
only 30 percent to 40 percent of the time were to telecommute. Those people whose main workplace was an office
would continue to work at an IBM location.

The Telecommuting Environment
There were four important components of IBM-Indiana’s
telecommuting environment: home office equipment, communications facilities, shared workspace at the IBM location, and

reengineered work support processes. Since the major initial
motivation for telecommuting was to reduce costs, the project
team did not plan to provide an ideal office environment, but
rather to provide a satisfactory environment with a minimal
investment.
The home office equipment provided included an IBM PC
with a standard set of software, an IBM Proprinter dot-matrix
printer, a desk, a chair, and a two- or four-drawer filing cabinet.
The PC provided was usually the machine that had been in the
telecommuter’s IBM building office. Standard software installed
on each PC before it left the IBM location included word processing, presentation software, spreadsheet software, FaxWorks
for sending and receiving faxes, and standard telecommunications software for getting into IBM’s LAN and mainframe IS facilities. The desks, chairs, and filing cabinets had been used in the
IBM offices that were being phased out. An employee could opt
to take a cash allowance for any piece of equipment and furnish
it himself or herself, but everyone had to use the IBM—provided
standard software. IBM configured the PC, installed the software, and moved all the equipment to the employee’s home.
Good communications support would be critical to the success of telecommuting. In addition to the employee’s existing
telephone facilities, IBM provided two more telephone lines
into the home office, one for voice and another for data. IBM
also furnished a 14.4 kilobaud fax and data modem and an
AT&T 722 telephone with the following features: two lines (one
personal and one IBM), speaker phone, conference between
lines one and two, memories to store numbers and access
codes, and hold and flash buttons. IBM paid the installation
charges and monthly bills for these lines.
IBM intended that an inbound caller should never get a “no
answer” or a busy signal, and the caller should be able to talk to
a knowledgeable person if he or she wished. This concept was
implemented as follows: Any call to the employee’s IBM extension was automatically forwarded to the home office phone. If
that line was busy or was not answered after three rings, the
call was sent to the employee’s phonemail box, where it was

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answered by the employee’s personal message that indicated
when the call would be returned. The phonemail message also
instructed the caller to touch certain keys to reach a live person,
and those calls were forwarded to the customer service center
to be handled by the people there.
There were two types of shared workspace at the IBM office
locations. First, there were small cubicles equipped with a telephone and a PC with the standard software networked to laser
printers and the IBM internal computer systems. One of these
work areas was provided for every four telecommuters, and
they were available on a first-come, first-served basis. A few
enclosed offices were also provided that could be scheduled
by managers or teams for private conferences. Although these
offices also contained telephones and PCs, there were too few
of them to allow their use as work space so managers were
expected to use the small cubicles for everything except private
conferences or team meetings.
The IBM location also included a conference room or
rooms for group meetings, a mail room, a secretarial support
center, and an administrative support center. Each telecommuter was also provided with a file drawer near the cubicles.
IBM-Indiana also downsized its office support group and
decided to use people provided by an outside contractor instead
of IBM employees to perform this function. In Indianapolis they
established several support groups: an administrative services
group that handled time cards, expense accounts, keeping publications tables up to date, and other administrative functions; a
secretarial pool that scheduled the use of shared offices, set up
meetings and teleconferences, and performed other secretarial
duties; a word processing pool that typed letters and contracts,
prepared graphics for presentations, and prepared proposal documents and meeting handouts; and a mailroom crew that distributed mail and faxes, handled copying, and distributed the
output sent from home offices to central office printers.
Virtually all work support processes had to be redesigned to
function in this new environment. For example, how do you
schedule meetings and teleconferences when no one is around
the office? Does the secretary call each participant to find feasible
times, and then call back to notify each person of the time chosen? Do you use e-mail for these communications? They decided
to rely on the PROFS1 calendar function to schedule meetings
and teleconferences. PROFS makes it possible for a secretary to
enter a list of people and the length of the meeting, and the computer searches for a time when all the participants are available to
meet. But to make this work, everyone had to maintain his or her
schedule of activities on the computer, and these schedules had
to be accurate and up to date. At first, some people did not keep
1IBM’s Professional Office System (PROFS) is an integrated office
software system that runs on a mainframe. Among its many functions,
PROFS provides electronic mail, a calendar function that keeps a person’s schedule and can make it available to others, and document
preparation, distribution, and retrieval capabilities.

their online calendar up to date, but the secretaries went on and
scheduled meetings based on the calendars, and those who
missed important meetings soon learned their lesson.
The processes that had to be redesigned ranged from how
to submit an expense account to how to get a proposal prepared. Not only did someone have to decide how to perform
each of these activities, but they also had to provide training
and written descriptions to all 300 telecommuters. The office
support staff prepared a thick reference manual describing the
new processes and then converted it to an online help system.

The Implementation Process
Wiley recalls setting up the team to implement telecommuting:
We couldn’t have done this without a small group of creative
thinkers—visionaries like John Frank—who also have the talent
to organize and manage this kind of complex change.
I asked them how quickly we could implement telecommuting, and they said they thought we could do it in 9 months.
We couldn’t wait that long, so I told them they had to get it
done in 90 days. Now I wish I had told them to do it in 30 days.
The faster you can get it done, the less chaos and resistance
you have from your people. When they get in the new environment and see it work, they realize it makes sense, they see
where they fit in, they learn what to do, and they do it.

There was a lot to do in 3 months. The team had to identify
the needs of the telecommuters and define the specific technology to be used to meet those needs. They had to determine who would telecommute and who would not. They had
to plan and schedule the activities necessary to move more
than 300 telecommuters’ offices to their homes. This planning
and scheduling took about a month, so they had only 60 days
to do the following:
• Purchase modems, software, and phone equipment
• Secure the necessary furniture
• Upgrade the local office telephone switches
• Set up each of the PCs with proper features and software
• Provide 3 days of training on the new tools for each
telecommuter
• Reengineer all support processes
• Prepare homes, including new telephone lines
• Deliver the equipment to each telecommuter’s home
• Vacate the freed-up office space
• Remodel remaining office space to adapt it to new uses
There were a number of issues that had to be resolved on
the fly, such as the tax and liability status of the equipment being
moved out into employees’ homes and how to deal with security issues relating to access to IBM confidential systems. There
was a lot going on at once—for example, they had construction
projects going on in six locations in the state at one time. But

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Case Study I-2 Telecommuting at IBM-Indiana

they got it all done and had some 300 people telecommuting,
and the freed-up real estate ready for release, in 90 days!

Motivating the Change to Telecommuting
Wiley knew that the move to telecommuting was going to be a
tremendous change for the people involved, and he took
responsibility for leading the charge. He put a lot of effort into
selling the idea and motivating those who were reluctant to
telecommute, and he was one of the first people in the state to
move out of his office.
Wiley sold the move to telecommuting primarily as a way to
save 50 IBM jobs in the state. He also expounded other benefits of telecommuting, such as providing more effective service
to customers, eliminating the time and stress of commuting
into the office, eliminating parking problems, and providing
more time at home with family by allowing more flexible time
management. But with the history of downsizing that IBM had
been through, saving jobs was the justification that most everyone accepted. According to Frank:
When we announced the move to telecommuting, about half of
the people involved were eager to go. Many who were initially
reluctant were quickly convinced by Mike Wiley’s explanation of
why telecommuting was necessary. But the remaining group
included most of our managers, who were used to private offices
with secretaries answering their phones and providing plenty of
one-on-one support. Wiley took the reluctant managers into a
room and told them: “I know you are uncomfortable with this. I
know this is bruising your egos, because IBM has conditioned
you to expect these perks. But if we don’t have the guts as a
management team to make radical changes in these dire circumstances, we are headed for disaster. We need to show the
rest of the company what can be done. If we aren’t willing to give
up some perks everyone will know that management doesn’t
understand what is going on. So I’m asking you to fully endorse
this.” Out of about 20 managers, only one transferred out.

Wiley agrees that the managers had the greatest problems
coping with this change. He says:
Those managers who had always been focused on the customer and had been out with their people helping them solve
problems were eager to adopt telecommuting as a productivity
enhancement. But the ones who had problems were those
who were hung up on the prestige of an office and a secretary,
who would come in and sign onto their e-mail and their voice
mail and sit in their office all day instead of being out with their
customers. Not only did they have a problem with prestige, but
they had a problem with what to do all day if they didn’t have
an office to come to. They had to ask the question: “What marketable skills do I really have?” And if they had none, then they
had to go get a skill that brings some value to our customers or
there would be no reason for them to be here.

According to Frank, about 25 percent of the telecommuters went along reluctantly with the change. However, after

167

experiencing the new environment, and after some improvements in the support technology provided, about half of this 25
percent converted to supporters of the concept. Frank notes:
It is kind of ironic. Many of those people who did not want to go
are now the ones who are writing testimonials and volunteering
to go around and talk to other employees and say: I did not want
to do this; I had five kids at home; My house was too small; etc.
But it works—it has advantages that compensate for the problems.
Still, about 10 percent of our people will probably not be
happy with telecommuting for any of a number of reasons. It
could be personal in nature, or it could be that they just can’t
be happy changing from what they have been used to for
many years.

Reactions of the Telecommuters
During the process and afterward, the team solicited feedback
via e-mail from all the participants and used this feedback to
identify and reduce the problems that were revealed.
Positive Reactions
The vast majority of the telecommuters agreed that telecommuting was good for IBM, and many felt that it was an
improvement for them personally. Many respondents reported
that they were pleased with the impact of telecommuting on
their productivity and job satisfaction:
Telecommuting is the best idea that we have come up with in
all the time I have worked with IBM. My productivity is much
higher than before and, hopefully, we have saved a lot of realestate expense.
I can honestly say that you would have to threaten to FIRE ME to
get me to go back to the traditional environment. I am almost
ashamed of how much time and money I wasted in the office in
my career. It has gotten to the point that I refuse to go to the office
unless it is absolutely necessary because it is so unproductive.
This has been the greatest single boon to my productivity since
I’ve been in IBM. I have become much more organized
because I have everything I need in one place instead of in my
car, on my desk, at the customer site, or at home. I also find
that I do many small things at odd hours; for example, I do
most of my PROFS while my kids are in the shower.
I am finding that I spend a lot less time at home than I imagined.
Where before there was always ‘the office’ to go to for mail, notes,
etc., I know that I can do that stuff for a short time after the kids go
to bed and clear it up and get it off my mind, but still be home. I
think this has let me spend more and better time with customers.

Some telecommuters were pleased that they no longer had
to drive back and forth to the office:
My workload has increased dramatically this year, and this program has allowed me to work the extra hours I need without
taking a trip downtown or walking down a dark alley to my car.
The net is that I can work whenever I want, I can work safe, and
I don’t need to spend time traveling. That is worth a lot to me.

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I live approximately 75 miles from the office, so telecommuting
has been a real time and car saver for me.

Many people were pleased with the improvements in their
lifestyles resulting from telecommuting, especially the ability to
spend more time with their children.
I have found that I spend less time at home than I thought I
would, but I very much like the flexibility. I can eat an early dinner with the family because of special plans for the evening,
then come back to my desk at 10:00 P.M. to cover just a few
more things. Also, I now have the option of sitting at home in
my jeans, free from traffic, suits and tall buildings, and asking
myself: How can I absolutely best spend my time to get the
needed results? This freedom allows more creativity in my
thinking about what is needed to get the job done.
My typical workday has me hitting my office at 6:30, getting things
done when previously I would have been starting the drive into
the office. A great benefit is the ability to eat breakfast with my
children, whom I previously seldom saw before 6:00 P.M.

Not all the feedback was strictly serious. Someone sent in
his top ten reasons why telecommuting should be fun:
10. Lunch is cheaper and usually resembles dinner the
night before.
9. The printer is closer and isn’t backed up or jammed.
8. The coffee is fresher, and the brand doesn’t upset your
stomach.
7. You can impress your friends because YOU have an IBM
PC at home.
6. The coffee mugs don’t have green fuzz in the bottom.
5. You have to keep your desk clean or your spouse will.
4. Now the neighbors really wonder what you do for a
living.
3. It gives new meaning to the term “business casual.”
2. The chances are better for being the ninth caller for the
cash song.
AND THE NUMBER ONE REASON . . .
1. When you want something thrown out you don’t have
to write “Trash” on it and trip over it for 3 days before it
disappears.
Concerns of the Telecommuters
Although most of the telecommuters ended up supporting
the change to telecommuting, some of the supporters
reported concerns. Several telecommuters were troubled by
the lack of interaction with peers that they very much
missed, and some noted that the lack of casual contact
made it much more difficult to exchange information and
work as a team:
I miss the camaraderie of the branch. It’s hard to get informal
communication going between teams, and tracking projects is a
little rougher.

The loss of the group-work setting has been a major psychological adjustment which most people are not yet over. The
interaction with peers shortened the time required to accomplish
many tasks because we were able to ‘group together’ for many
short, impromptu meetings to decide strategy, plans, etc. This is
very much missing and missed.
The grapevine thing is missing. Face it, we all like to know
what’s going on. We don’t know what’s happening out there
anymore. We eat lunch alone. We don’t exchange news items
that concern our customers. There is no networking, no socialization, no moral support.

Wiley recognized that lack of social contact and casual communication would be problems, and he has encouraged IBMIndiana offices to set up special occasions, such as weekly
office luncheons, to provide opportunities for interaction. IBMIndiana has also found it necessary to be intentional about
communication by scheduling meetings to substitute for the
informal communication that took place when everyone was in
the office. They also make heavy use of teleconferencing to
substitute for face-to-face meetings.
Some telecommuters noted that it was more difficult to…

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