Shell waves goodbye to 3,000 IT staffers in $4bn outsourcing gig

Royal Dutch Shell today inked three outsourcing deals – worth $4.2bn over five years – to spin out IT and telecoms operations. In January, a leaked memo to staff revealed the oil company was in outsourcing talks with EDS, AT&T and T-Systems. Today, Shell sealed separate agreements with those companies and said most of its 3, …

[b shubin]

Executive promotion/bonus lifecycle

[1] pick business function(s) to outsource; friends who run outsource firms can help, and later provide favors, kickbacks, and/or references.

[2] present financial figures (generated by friends in [1] above, from delusional optimism and marketing materials) that show substantial (usually unrealistic) cost savings; ignore or dismiss any mention of functionality or service levels (those can be invented later); add huge doses of marketing-based fertilizer.

[3] sign outsource agreements; put previously invented cost projections into future budget(s); inform everyone of stunning success, and watch the share price spike (note - flip stock options).

[4] collect bonus and/or receive promotion (and soonest, before the real consequences begin to manifest - in a big company, this will hopefully take some time); MOVE ON (this becomes important later).

[5] as the cost savings prove illusory, and the functionality, quality and flexibility of services plummet (this is normal in outsourcing), blame the implementation ("behold the incompetence! i would have done it differently..."); assert that your glorious vision was mishandled (note - good time to sell short).

[6] as former employer desperately scrambles to insource the function(s) outsourced by your initiative (note - stock price will fall, buy low), evaluate current employer for the same sequence (go back to [1]).

...rinse, repeat.

[John Macintyre]

"EDS tackling end user computing services"

EDS + end user = need I say more? :)

[Adrian Challinor]

So long Shell Wythenshawe

I worked in IT at Shell, starting in Wythenshawe. Despite the car park that looked like a Stasi torture chamber, I had a great time. Moved to Shell in London (Still in IT). I have very fond memories of my time there. I wonder if the outsourcing people will be as dedicated as some of my colleagues who tended the mainframes there? I wonder?

Coat icon, because its time to leave.

[Hunde Kotze]

Bonuses for the bosses, no doubt

Big deals like this, which will eventually cost the company FAR more than it saves, are done for short-term accounting-book window dressing, and more importantly, big fat bonus packets for the dweeb management that thinks it's just wonderfully creative and brilliant.

[amanfromMars]

From the Frying Pan into the Fire?

Surely if you outsource IT and telecoms operations, you relinquish Control and present a Vulnerability to be exploited...... which will be exploited. It makes available though, an interesting proxy scapegoat, should things be discovered to be going pear shaped.

[Anonymous Coward]

Cannot wait...

My company has been working with Shell for quite a while. They actually pushed us to certify our software to work with Vista as they want to update *ALL* their systems to it.

And outsource to EDS.

Will be a particularly beautiful flop :)

[Anonymous Coward]

@amanfromMars

It's a sad story.

On the plus side, I understood what amanfromMars said in a post.

For what it's worth, I agree with him.

[Rob]

shock and surprise

Whilst i am amazed that companies still seem to think outsourcing is a good idea, -b shubin has it dead on there from what I've seen, I'm even more amazed that mars man has made a vaguely coherent post.

(i only read it accidentally, honest, my eyes just slide right over them usually)

well done whoever wrote that bot, it's getting slightly better.

Paris, as she'd welcome all 3000 ex-shell people with open appendages

[teacake]

Missing word, shurely

"EDS tackling end user computing services."

Shouldn't that be "EDS tackling end *of* user computing services."?

[Anonymous Coward]

New going rate

Well I think once a company does this sort of thing the IT comunity should black list them so when they come crying no one... I mean no one should offer his service for less than double the going rate... THAT WILL TEACH YE... WE JUST CANT TRUST YE ANYMORE.. PAY! That goes for you cheap-o's too. You want de money follow suit.

[Aristotles slow and dimwitted horse]

Because...

£13.9bn in earnings just isn't enough is it.

[Aram]

@amanfromMars

That definitely makes sense! Good work, fella!

[Joe M]

Give them the business boys

The reason these outsourcing deals are done is because large companies want to rationalise their operations and concentrate on their "core business".

But you really have to pinch yourself. Are there really such idiots in the world - business executives and board members who think that information processing and communications are not "core business". Some of us foolish mortals think that controlling information and communicating it effectively, is THE business!

Oh well! Time will tell.

[Anonymous Coward]

EDS?

As someone who works for EDS's competition, based on what I've seen of their handiwork, Shell's non-IT personnel are screwed. For those folks who aren't RIF'd, and are "oh so fortunate" to interview for their jobs, but at either reduced pay or substantially reduced benefits, good luck and assume the ankle grabbing position. I went through one of these "outsourcing" fiasco's about 12 years ago and it was an experience I'd just as soon never go through again.

Unless you get the money up front, you're so fooooooocked!

[black general]

Of course Shell should outsource

Shell is an energy company. Shell is not an IT company. While I hold the highest regard for shell IT staff, I still think it is a good idea for shell to outsource. Outsourcing will enable Shell focus more on their core mission : energy. As long as they can get the outsourcing relationship to work (yeah, thats the hard part), i think its a brilliant idea.

[Let me now duck before i submerge under the expected avalanche of insults and criticism for this contrarian view]

[Grant Alexander]

Outsourced from the start

My perspective on this is as an ICT Manager who has outsourced from the start. Our company has grown rapidly in the last 10 years, taking on very large new clients and expanding our number of offices, including moving overseas. In that time, I have remained the sole 100% ICT staff member. When all the hands on stuff got too much for me I resisted the management call for me to employ staff, and instead engaged a 3rd party as a service provider.

It is a very different show when you have to make staff redundant or have the new service provider offer them employment, I agree.

Outsourced IT does have its disadvantages, but for a smaller growing business the benefits of tapping into an organisation that can put an expert in most any field onto the project is enormous. We could not afford to have expert skills in all the areas we require on staff (or even highly competent amateurs), but we can access them through or supplier.

[Danger Mouse]

I love outsourcing

I'm in the fortunate position where I spend half my week continually digging a certain outsourcing company out of the sh1t after they lay off permi guys who really know what they're doin, the rest of the week I work on projects for direct clients that no longer trust their outsourcers.

<coat, yeah that one with the SCAB printed on the left inside pocket>

[Anonymous Coward]

Shell; so long and thanks for all the fish

@ black general work for an IT outsourcing company perhaps?

I predict that Shell will be bought out in about 2 - 3 years by some other Oil company.

Outsourcing in this fashion is nearly textbook for a company take over. The outsourcing company will be contracted for a lower figure than the payroll, so the paper value of the company rises. But, there will be no innovation or expansion at Shell. Outsourcing companies try to worm themselves in and the rot begins, just before they have control of the company it gets sold out.

It is a race to the bottom if you will - does no one any good. And it is a self fulfilling prophecy, people at Shell in all departments will look for new jobs. Shell will hire the cheapest person who applies for the vacant positions just to keep the engine running, who invariably will be young, they won't know what they are doing and just goof around. Normally one director will be out in the cold- he will be the most affable one in the company - and also the one to eventually deliver the news of the sell out to the newly hired troops.

It may also be the heralding of the replacement of oil with other energy sources, but it won't be shell that brings it to the marketplace, it looks like they have thrown the tool in and just want a pay day on the shares.

IT is always about competitive advantage, and most people in business know this. It only becomes a utility when you wish to tread water, and you only want to tread water when you are looking to sell. Otherwise you need the innovations of IT to keep yourself in the game, and you need your own innovations to get an edge on the competition. But these innovations take a year or so to get into place, so if you are looking to sell then you drop that aspect first, you won't see the reward only the cost, as these elements tend not to translate to another organization's business model, they won't be valued.

Shell will be valued on the oil fields it owns, the retail outlets, and in a lesser degree their capacity to drill the oil and the logistics of transporting it. The speed of their network, their employee satisfaction, their web presence, ties with other oil suppliers and even a breakthrough in oil locating if unproven will probably be valued at next to nothing. They don't need inhouse IT if they are selling up.

[Legless]

Choo-Choo! Gravy Train

25 years as an IT contractor and I've never, not once, seen a successful IT outsourcing project.

But, on the bright side, it's gravy for people like me. The initial outsourcing creates vacancies for people like me to go in manage the transition. Then, when my feet are firmly under the table, I watch as management hound out the permies, generally starting with the people who are good at their job, but crap at company politics. That generally leaves me running mission-critical systems that nobody else understands. This is a *really* good time to demand a rate-rise - and I get it.

The next few months are fun. As the original staff are removed and replaced with cheaper, younger geeks, more and more work ends up with me and the rest of the contract IT hyenas. Which means more and more hours (did I mention that I only work on an hourly rate? Daily rates are for suckers). This goes on for a few more months before a bean-counter notices how much we're actually earning. So they have a talk and ask us to reduce hours or accept a rate cut. A rate cut is out of the question so we stop doing so many hours. Then systems start falling over due to lack of maintenance or monitoring. Meetings are held where we point out in a I-Told-You-So-Fashion, backed up with e-mails, that we predicted this. Management's next bright idea is to ask us to take on training roles and bring the new guys up to speed in howto manage the systems. This works fine on a day-today basis but falls flat on it;s face during the next phase.

So we train youngsters in looking after the systems. The workaday sort of stuff. Systems are all running OK then management call us in, thank us for our efforts, and tell us we're no longer required. Too expensive. We shake hands and wander off into the sunset.

Then a while later (can vary from weeks to months) something out of the ordinary happens and everything falls over in a big messy heap. Youngsters are way out of their depth and company is deep in the shit. This is where they ring us up again.

"Can you come in urgently? Same rate as before?"

And we laugh. Most of us are happily ensconced elsewhere and can't or won't (in my case) break a contract. Those of us who are free demand around double what we were previously charging and the gravy train goes on.

Repeat ad nauseum.

Oh - and if EDS are involved in automatically ad on £10/hour just for dealing with the fuckwits.

Cheers

[Joe M]

@black general

No insults needed. What you say is eminently sensible and rational. And in a sensible and rational world it would work. It just doesn't work here, in our little confused corner of the galaxy.

There are a million small and large obstacles to taking the heart out of your business and giving it into the tender care of another party. (You don't think that IT is the heart of modern business? Imagine what would happen to any large organization in the world, which lost its IP capacity for a month - or a week.)

Just one small point of contention. Two businesses: each trying to fill up the bottom line and power ahead. To do it, one needs to get the best, most up-to-date IT that money can buy. The other needs to get the most for the cheapest, crappiest IT it can get away with. Good luck to one of them!

[Anonymous Coward]

So if you're getting the push, try contracting, few regret.

shubi is spot on with the "Executive promotion/bonus lifecycle", that is how and why it happens, probably legal too.

And so is "Choo-Choo! Gravy Train" by Legless. If you're a committed staffer who's being pushed, get brave and have a go at contracting. Although I've found contracting work mind numbingly boring compared to the scope of work acquired as a conscientious permanent. The money is bewildering!

[Anonymous Coward]

poor sods.

By that I mean the outsourced and their customers on the ground.

The supplier will bring in lots of people with "rabbit in the headlight" looks telling you how great it is working for the supplier. Meanwhile pretty much every benefit you currently have that is not explicitly mentioned by TUPE will go out the window.

You won't get any pay rises (not even cost of living), your rising stars can kiss goodbye to any promotions/step increases in pay. No training either. Anything (especially skilled and interesting work) that can sent to "lower cost" locations will be. Its a crap experience that I wouldn't wish on anyone.

I went contacting too. There's good money to be made if you have half decent skills and a relaxed can-do attitude.

[Fuzzy]

WOW another sucker

Considering the multitude of large out sourcing deals that have gone wrong, I am amazed that Shell has gone this way.

@Legless

You couldn't be more right. being in a similar situation it is almost a licence to print money. Sure you may feel a twinge of guilt about it all, but that passes in about a nanosecond

[Vulpes Vulpes]

You posted this story a day early.

This is the best April Fool I've heard this year.

[SmokeyMcPotHead]

Outsourcing...?

...I've never quite got a handle on where the outsourcing benefit comes from. Generally the staff are paid the same wages as internal staff would be, and your probably paying a fixed amount per day for that body. So given that the outsourcing company is there to make a profit and not a charity you're probably paying alot more than you would normally shell out. OK you have no HR costs, but given that many companies don't have any formal HR facilities these days, because their tendered out, I just can't see the cost benefit.

Unless you don't have a guy or two on site permanently looking after stuff I can see little benefit.

I used to work for an out sourcer myself and was charged out at about £400 a day I think back then. So given that I was there full time - this seems a hell of a lot to pay for relatively basic IT support.

[Steve]

I feel sorry for the poor sods...

...in Shell who aren't IT-staffers. but who know something about how the systems work. Now every time something goes wrong (printer won't print, network glitch) they'll have the choice between logging a support call and twiddling their thumbs while some prat takes 4 hours to call them and then tells them to reboot their system and see if it helps, or just fixing it themselves.

Pretty soon everyone around them will know that "it's much quicker just to ask Fred". Meanwhile the metrics for the outsourcing folks look great, because the number of support calls goes down, so management give themselves a pat on the back, and send out memos reminding people not to "interfere" with the systems themselves, because they have great outsourced IT staff to do that.

Eventually Fred gets a smack on the head because his productivity is down, since he's spending half of every week fixing all the IT problems. Either he stops, and his co-workers get irritated at his lack of helpfulness, or he quits due to overwork.

In the past he would have been hired by the outsource outfit at twice the salary, but since by now they've offshored everything to Timbuctoo that won't work. By the time the management realize their mistake, usually just as they start an upgrade cycle, it's too late to repair the system or the relationship with whatever staff are left...

[Scott Mckenzie]

Buy out Shell...

....you can tell it's April Fools can't you.

One of the largest oil companies in the world, just out of interest who on earth is going to buy them out?

[Andy]

it's 2008!

Um, it's 2008 and still companies think it's a good idea to outsource.

Oh well.

[Ishkandar]

Whom the Gods wish to destroy...

...they first outsource !!

Great move, Shell. Just hive off all that deadwood to the outsourcer and, later, insource all those you really want !! Sod all, the unions can do about it !!

[amanfromMars]

Slick IT Move ........ for a Greasy Palmed Monkey outfit.

"Whom the Gods wish to destroy... ...they first outsource !!

Great move, Shell. Just hive off all that deadwood to the outsourcer and, later, insource all those you really want !! Sod all, the unions can do about it !!" ..... By Ishkandar Posted Tuesday 1st April 2008 09:35 GMT

Very perceptive, Ishkandar.

Seems as if Royal Dutch Shell are going into the IT Business on the QT* ....in Order to Lead IT with MetaDataMining and Underground Mind Reserves? The April 1st Dateline Offers a very Real and QuITe Immaculate Stealth for a BetaTest Drilling.

* Typical of their Pioneering Heritage and XXXXPeditionary Nature, one should certainly not be surprised at them being on the Quantum Track. Let's hope that they fare better in IT than they do with Oil..... which is entirely dependent upon the Quality of Rewarded Leadership and that is always going to be everybody's problem when you get it wrong and Sheer Sublime Delight when you get it right.

[Eddie]

@ Scott Mckenzie

Gazprom, Yukos, Rosneft,Sibneft?

Through proxies...

Don't believe it for a second, personally, but they have enough capital (particularly with screwing BP and Shell over their Russian ops...)

[Rohop]

Outsourcing

Shell have wanted to ditch everything that isn't part of the extracting, refinement and distrubution of Oil products for some time. They want to ditch the retail part, they want to ditch the IT.

It wouldnt surprise me if in a few years that some other oil company has bought them out, as they are struggling to make up the problem they have with the reserves they have on stock.

Having worked for Shell in the front line, this has no real impact as most of the IT support was outsourced anyway.

[Adam Foxton]

It's THAT weird

That amanfrommars, in trying to mess things up as he normally does, has actually made more sense than these Shell guys.

[Anonymous Coward]

Sssshhhh!

As a contractor who gets paid extremely well to fix the problems created by outsourcing (as detailed perfectly above by others) I fully support Shell outsourcing their $4bn IT budget for the savings of a whopping $250m (so a whole 6.25%, oooooh - they'll never see a >6.25% drop in productivity, noooo).

Ka-Ching!

[amanfromMars]

Shellshocked in Complacency.

"That amanfrommars, in trying to mess things up as he normally does, has actually made more sense than these Shell guys." ..... By Adam Foxton Posted Tuesday 1st April 2008 12:43 GMT

Adam,

I suppose that is because some things are easier for you to understand whenever kept nice and simple.

And the next time "trying to mess things up as he normally does" will be the first time, although to cause Absolute Chaos is so much easier for Fools. However, it is one of those Dual Use Technologies, as it is very tempting to unleash it whenever Intellects are Challenged too. A definite weakness/psychological flaw to succumb to that renders the Fool, a definitive Lead in Self-Destruction, and the Sage a Grandstand Seat at their Demise.