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Nearly 3,000 IT workers affected in Shell outsourcing deal

Royal Dutch Shell will farm out its technology and telecommunications infrastructure in three deals valued at about $4.2 billion. Here's how it affects the company's nearly 3,000 IT workers.

In his ZDNet Between the Lines blog today, Larry Dignan reported that Royal Dutch Shell will farm out its technology and telecommunications infrastructure in three deals valued at about $4.2 billion. Here's an excerpt from his post:

Shell said in a statement that it will outsource its telecommunications and networking to AT&T in a $1.6 billion deal, hosting and storage to T-Systems (a unit of Deutsche Telekom), for $1.6 billion (1 billion euro) and computing support and systems integration to EDS for $1 billion.

For current IT pros working for Shell, the deal breaks down like this:

  • Shell will transfer 1,500 IT workers (contract and full-time) to EDS
  • 560 Shell networking employees will become AT&T employees
  • Shell will transfer 900 employees to T-Systems

Have you, as an IT pro, ever been transferred in such a way? If so, what challenges did you face, both corporate and culturally?

About

Toni Bowers is Managing Editor of TechRepublic and is the award-winning blogger of the Career Management blog. She has edited newsletters, books, and web sites pertaining to software, IT career, and IT management issues.

22 comments
big.intl
big.intl

The Key is Flexibiity, I have been a Technologist > 30 years, growing the technology at each segment to a higher level of connectivity, content and security. In Contracting for major firms a key I have noted is "flexiblity" Get ahead of the pack, chart your path, make the best of it, smile and a good attitude. The new location may offer additional perks, classes, contacts or other perks. Work, get the money, watch the spending, pick up the perks, say thank you and if you feel uncomfortable, put your resume on the street. Companies will do what they need to based upon economic conditions and those who make those decisions may be remote from the real world. Key is get the money, keep a good attitude, don't speak all your mind to management, get all the training and increase the skill sets, rebuild the resume if/as required. Outsourcing may be a good thing, you may be able to go into a tele-communiter position and work from home office, avoid the travel time and get the money. Good luck to you'all

PAexec
PAexec

I was part of one of large outsourcing deals between IBM and AT&T. What happens to you - the professional largely depends on your attitude, and your ability to function in an environment that is in flux. Be positive, do NOT declare yourself "the resistance" or the "victim". Both companies need anchors to keep the business moving, and you can be the one. A lot of good things have happened to people with good attitude and professionalizm in these circumstances. Make most of this opportunity.

les.forrest
les.forrest

I was part of an outsource agreement that saw 3,900 American Express employees globally move to IBM. This was a us$5.5b deal. I can only talk about my own experience. As a manager of 24 staff, I gave them regular reviews and counselling, help them over the change curve, but as a manager didn't receive any of this myself. What was good about the transition was the fact that from the point we were notified it was happening (or the rumour was substantiated) to becoming an IBM employee was 3 months, so that gave little time to dwell. Transfering to IBM we found what I can only describe as racism. We were referred to as IBMers, but as we were part of SO (strategic outsourcing) we were not what is referred to as a heritage IBMer. In other words, you weren't hired by IBM, just adopted. Once transitioned, I sat at the same desk/office, doing the same work, but my colleagues had become my customers. No-one worth their salt in IT just performs their role, and those are the grey areas when you are transitioned, but work in the same building doing the same role, but for a different company. I had to start logging seconds/minutes spent working on issues with VP's etc, and then billing them. That was the driver for me to put my hand up for voluntary severence. What I will say that is really scarey, is on our floor were about 150 people, probably 90 transitioned to IBM, and within 12 months 22 were either dead or off on long-term stress, mostly because of the constant stream of people leaving and not being replaced. Well, IBM kept telling us IBM stands for I've Been Moved, so rather than wait most of us left. It can be a time of great opportunity, but any stability you had before has diminished.

RealGem
RealGem

A former employer of mine did something similar, albeit on a much smaller scale. They kept a small group of people, essentially business analysts, project managers, and architects, but outsourced the other functions. Not everyone got a job, though. People got categorized into three groups: the keepers, the outsourced, and the laid off. Either the outsourcer didn't want that last group, or the employer decided that they weren't worth paying an outsourcer for. The sad part was that the list with the three groups was accidentally left in a public network folder and it spread like wildfire.

hcordero
hcordero

Is not like they are going to be laid off. They are going to keep their jobs, and paid by a different company. that's the way I see it.

RFink
RFink

I was working as a contractor on the GM account when EDS showed up. GM came up with a list of employees considered IT and they were transfered to EDS on 1/1/1985. It was not a happy new year for them. EDS's benefits were not as good as GMs. EDS went on a hiring spree like I've never seen since. I was hired in March 1985, it wasn't until June that my manager inquired about my college education. He asked if I had a college degree. I said "yes" and that was the end of it. He didn't care what I majored in. I had the paper. On 12/1/1986 GM gave Ross Perot the boot. IMO EDS was a good company until then, but that's another discussion.

Lost_in_NY
Lost_in_NY

and I have a ery different perspective. I was not outsourced fortunately but knew many that were. And almost all of them were laid off by IBM within 3 years of the being outsourced. Oh yeah - and they did not retain the same level of benefits they had before either and I believe the guarantee of same salary was only for a limited period of time. I hope that the former Shell folks will have a better experience but based upon the comments I saw in this thread from those familiar with EDS, doesn't look that way.

DBA-MI
DBA-MI

in the long run these people will be squeezed. the smart ones who can find other jobs will leave. the rest will hang on as they cope with a lower standard of living. less benefits are a given, especially medical and retirement. the mgmt genius behind all this will get a big promotion and a big bonus and salary, he will retire as customer service declines but it won't be his problem anymore. in 10 years new Shell mgmt will see the light and take back IT. THAT guy will then get a big bonus for having such a great "new" idea.

tomdub1024
tomdub1024

worked for them...escaped 3 months later, they made it nearly impossibel to actually help the customer and pushed to create more service tickets to help get additional billing. Was the worst environment I have ever worked in. The acronym some came up with was EDS="Evil Data Systems" Good luck to those folks...

maurimev
maurimev

Fire 3,000 IT workers is very expensive and traumatic, outsourcing is squeezing to get the most out in the laying out process...

jamesdtuttle
jamesdtuttle

This is clearly the result of some idiot beancounter at Shell, who will probably be rewarded for this very stupid move. Shell has INCREDIBLY massive computing requirements processing data from seismic surveys and such, as well as from reporting real time well logging data that makes timely processing worth literally millions per hour. Many of the algorithms and processing techniques are highly proprietary and jealously guarded - at least they used to be. And they're turning it over to THE PHONE COMPANY ? Unbelievably stupid. They'd have done much, much better to outsource their idiotic management.

Womble
Womble

There are 2 things to be drawn from this 1/ EDS have some really good sales people 2/ Shell has money to burn When an outsourcing deal like this is run, the first question you need to ask is how EDS is going to make money. They will want to make 20% ROI, and outsourcing adds an extra level into the structure, being the interface between the 2 companies for billing. this means that for each piece of work performed, you have an extra cost involved. There are only 2 ways this can work 1/ the original overheads of the organisation being outsourced were cumbersome and unweildy, and this is seen as a way of cutting the buraucracy already existing. Telstra in australia did this, with Varying success. The NDC ofspring didn't work well as they exported the Telstra culture and processes at the same time, While Visionstream did, as it instituted new culture and paradigms. 2/Outsurcing programme will migrate to a lower cost structure - typically by migrating work to places like india, and leveraging more work out of existing resource. This has been successful when the outsourcing organisation has realised that the competencies required to perform a task can be realised at a much lower skill level that the original organisation realised, and the competencies of the original group can be better utilised at higher level tasks With an organisations the size of Shell, there should be no reason why competent management could not achieve similar savings with organisational renewal and dedicated management. Shell obviously want to reduce their costs, but has not got the bravery or competencey to do it in house. the usual spouting of sticking to core competencies is is a cover for saying we don't know what we're doing in this area so we will put it out to someone who does. Cable & wireless did the same and shrunk from a global player to a niche player very quickly Shell needs to be carefull that it does not lose access to specific core it skills to an outside player. this would then lock them into this player well beyond the length of their present contact. they may be charged $50 per task at present, but the next contract could well be $150

catseverywhere
catseverywhere

Why don't we give up the pretense and all just collect our digital credits from Global Elite Incorporated. (formerly known as "government") I say it again; there is something fundamentally wrong with an economic system that views people as a liability and not an asset.

ved_rai
ved_rai

I remember couple of years back similar deal between a Malaysian bank (MLB) & Global service provider (GSP). MLB outsource it's IT Infrastructure & backoffice services to GSP. The deal was that GSP will not lay off any of the 200 MLB employees (which are being transfered to GSP) for the first two years. People were not happy because they were having better benefits ($$) than GSP and some of them even complained that they were treated as second class employee compared with GSP. The outsourcing was a streategic decision and took 3-4 years to settle. Many of the employees left GSP who were with bank since decades...for some reason they couldn't adjust to the GSP culture.

daman4u2b
daman4u2b

The last time EDS took on that many people they forgot to tell the employees that one of the "Conditions" of their being a EDS employee was that they had to have a Masters Degree. This was brought up after the outsourcing deal so the employees had no recourse and were basically out of a job.

NotSoChiGuy
NotSoChiGuy

Hard to say how this will impact the employees in the short-term without knowing more specifics: 1). Will their tenure transfer to the new company, as well? 2). Are the benefits comparable? (an earlier post suggested this may not be the case) 3). What is the culture like within the new firms? In the long-term, I'd really like to see a follow-up on how many of these approx. 3000 employees were let go by their new firms, and how many were still working on the Shell client account. I would say that if I were any of the affected employees, my resume would be making the rounds.

WiseITOne
WiseITOne

It is very simple: outsource-medical-pension-retirement=more money. Every company has people in it. People cost money long term no matter there involvement. This is purely from a business standpoint. Look at long term healthcare and retirement costs and you will know why companies love to outsource. Not to mention the labor is typically cheaper overall. It is sad that humans can't be regarded as assets but honestly, Exec. management could care less about you and me. We are drops in a large bucket, making some small waves at times but then melding into the great whole as insigificant. Perhaps that is a pesimistic view but it is the truth from the eyes of executives and owners. The heart of man grows cold when money surrounds it.

eejc
eejc

having to work on Shell as an account at global level in one of the top 3 IT companies, at certain times it meant losing money (in the million region) to gain Shell's name as a customer. and at the same time knew of fat cats in the company earning thousands of dollars doing much less work than average joes. i also have a friend who works for EDS and personally thinks that all the company cares about is the bottom line figure and would not recommend anyone to work for and with them. couple this 2 together, i smell trouble abrewing BIG time. outsourcing is not necessarily a wrong move. but in the wrong hands, it can potentially be a disastrous move.

john.jelks
john.jelks

is incredibly complicated. As an exploration Geologist, I, (along with my Geophysicist counterpart), had to follow well and seismic data all the way though processing so it did not get turned into "salad". I doubt an outsourcing IT company will be able to keep the pace, technically. James Tuttle: hats off to you ? you nailed the issue. Shell: good luck with getting reliable exploration results, or even being able to retrieve a well log or 3-D velocity survey data, much less be able to map it. I can hear it now; ?yeah, we?ll get that for you ? hear is your support ticket number . . .? an exploration Geologist, I had to follow well and seismic data all the way though processing so it did not get turned into "salad" (along with my Geophysicist counterpart).

Womble
Womble

I am always amazed at how often people seem to think that outsourcing will save them money. The simple fact is that EDS needs to make money out of the deal. The only time outsourcing really works is when the existing management are so incompetetent that they think a wireless mouse is a rodent without wiskers All you are doing is transferring the percieved risk to an outside organisation - giving the internal risk of loss of proprietry skills and information. It is way better to take on the risk of internal renewal and reinvention, even at a cost of profit in the short term because that renewal will provide for increased profits in the lomg term

Skip Jones
Skip Jones

Don't shed too many tears for the boys in the Hague. They're paying more for worse service. Any large company that outsources an essential service deserves to get fleeced. AT&T (EDS, too? It wasn't clear) got it this time; IBM or someone else will get a fat contract next time. Part of the problem is that Royal Dutch is too big - if you want to get dizzy, just look at their IT org chart: they have something like 10 CIOs (!). No wonder they can't get anything done. In either case, this is no big deal. They've outsourced their workers before, spent a lot of money for poor service, brought it back in house, got rid of it again, etc. Wade thinks that people cost too much money when you figure in benes and pension. Well, Shell (at least Oil Products) are living in the past: they offer pension after an employee gets in the neighborhood of 80 points (you get 1 point for your age and 1 point for year of service). No good worker today will sign up for 25 years of that; the mediocre ones looking for "job security" might. Suckers. Needless to say, a Gen X or later person would be a fool to wait around that long, because the odds of getting wacked are too high (how do you think all those people from Texaco and SOP ended up in Motiva/Equiva and then to Chevron? It was move or leave). Couple that with the fact that raises are small and bonuses are poor when they happen; one can get a better "raise" by switching to a new company after a few years of service. In short, the pension model is dead - big corporations don't care about their workers, so there is no way they'll let 'em hang around long enough to vest. A smart worker will bail when a better deal comes along, and let's face it: big oil isn't exactly cutting edge. Why? (hint: for the management that are getting close to their 80, there is _no way_ they will attach their name to any risky projects, only the safe ones.) In the end, there is nothing more costly than outsourcing, and it isn't just the money. It is also the KNOWLEDGE of how things are done. Contractors leave or get swapped out any time. Consequently, the same mistakes are made over and over because no one has the experience with dealing with them previously. Why do you think the average age in Shell's refineries is 53+? Because they can't outsource those jobs (most stuff can't be book learned, because it was "off-spec" due to the necessities of Making Things Work), and not enough new people are coming in order to have the knowledge and experience passed on to them. The refineries have to hold on to their people by hook or crook, lest they lose that knowledge.