Global Economics

Shell Inks $4 Billion IT Outsourcing Deal


Layoffs are certain as the oil giant outsources most of its tech infrastructure in a deal with AT&T and others

Shell is to transfer almost 3,000 IT staff as part of a $4bn deal to outsource the bulk of its technology infrastructure.

About 2,960 Shell IT staff and contractors are expected to be transferred under the deal with AT&T, EDS and T-Systems, with Shell saying there will be "20-30 redundancies at worst".

But transferred staff will not retain their existing rights and redundancy packages under their new employers, with Shell estimating these will expire after about two years.

The oil multinational expects "significant improvements in efficiency and productivity" and to deliver "important financial benefits to Shell" during the five-year deal.

EDS will be the operational integrator for the contracts, with approximately 1,500 Shell IT staff and contractors to join EDS, spread throughout 65 countries.

About 900 Shell staff will transfer to T-Systems and 560 to AT&T, with employees mainly coming from Malaysia, the Netherlands, the UK and the US.

From July the companies will serve Shell and its subsidiaries in more than 100 countries, with AT&T looking after network and telecommunications, T-Systems hosting and storage, and EDS end user computing services and operational integration of the infrastructure services.

Shell said it had signed the Master Service Agreements for the deal and was consulting with unions over the deal.

Union Amicus had earlier threatened to block the deal by taking legal action because of concerns over changes to redundancy packages.

Swee-Chen Goh, Shell VP global IT infrastructure services, said staff 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 about "24 months".

She said: "Staff 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.

"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."

Goh said the deal was likely to be extended beyond the initial five years if it proves successful.

She said: "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.

"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."

Alan Matula, Shell CIO, said in a statement: "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."

EDS will manage desktop, service desk, onsite services, backup and disaster recovery, mobile information protection and managed messaging services.

AT&T will deliver WAN and LAN, voice services including IP-based telephony, managed security solutions, mobility services and will support Shell's Virtual Private Network service for more than 50,000 remote workers.

T-Systems will take over the infrastructure and IT professionals of Shell's global data centres, including three centres in the Netherlands and one each in Malaysia and the US and host the majority of its global SAP services.

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