Shell enters into $4B outsourcing deals, expects layoff to be at minimum
Shell to outsource IT networking services considered one of the biggest in the IT industry in the last five years
Royal Dutch Shell announced recently that it has entered into a $4-billion, three-part deal that would outsource its IT networking services worldwide but said the layoffs of its 3,600 staffers and contractors would be kept at a minimum.
In statement issued last March 31, Shell CIO Alan Matula said Shell will be outsourcing its technology and telecommunications infrastructure through three deals valued together at more than $4 billion. This development was described as one of the biggest outsourcing deals in the IT industry in the last five years.
IT giant companies AT&T;, T-Systems and EDS were announced to be the winners of the five-year contracts, with a $1.6 billion networking and telecommunications piece going to AT&T; a $1 billion hosting and storage deal going to T-Systems, a subsidiary of Deutsche Telekom, and a $1 billion computing services and operational integration piece to EDS, according to a report published in eWEEK.com.
“Partnering with EDS, T-Systems and AT&T;gives us greater ability to respond to the growing demands of our businesses. It allows Shell IT to focus on Information Technology that drives competitive position in the oil and gas market, whilst suppliers focus on improving essential IT capability,” said Matula.
Most of the agreements will take effect on July 1. According to Businessweek, some 2,960 Shell IT staff and third-party contractors are expected to be transferred to AT&T;, EDS and T-Systems, with Shell anticipating minimal redundancies.
But Shell staffers transferred to new employers will not retain their existing rights and redundancy packages, with Shell estimating these will expire after about two years, the Businessweek report said.
The report added Shell expected “significant improvements in efficiency and productivity” and to deliver “important financial benefits to Shell” during the five-year deal.
Businessweek said EDS will serve as the operational integrator for the contracts and will absorb about 1,500 Shell IT staffers and contractors in 65 countries. About 900 Shell employees will transfer to T-Systems and 560 to AT&T;, with workers mainly coming from Malaysia, the Netherlands, the UK, and the United States.
Swee-Chen Goh, Shell vice president for global IT infrastructure services, said Shell employees would be able to choose “as much as possible” whether they were transferred to a new employer, and that most transferred staff would retain their rights as Shell employees for a period of approximately “24 months.”
“Staff members have been involved throughout the process and in most countries we will specify a limited period of time where employees’ rights are comparable to what they have now but it is not feasible to maintain that on an ongoing basis,” Goh said.
“Our goal is to make redundancies zero, there is a significant amount of work available both inside and outside of Shell, and the worst case is that there would be 20-30 redundancies globally,” said Goh, adding that the deal was likely to be extended beyond the initial five years if it proves successful.
“We want to look for value out of this, coming from an improved ability to focus on what drives IT in our business and access to know-how and resources in this industry,” Goh further said. “We have built the foundation blocks for success and assuming we achieve our goals there is no reason why we would not continue with the arrangement.”
