TheRegister.co.uk: Shell signs ‘Mother of all outsourcing deals’
By John Oates
Published Tuesday 4th May 2004
Posted 5 May 04
In what the Indian press is calling “the Mother of all outsourcing deals”, Shell has signed up IBM and Wipro to offshore parts of its IT department. Indian papers claim the deal is worth more than $1bn, which would make it India’s biggest ever single contract win.
As first revealed here, Shell plans to cut between 1,900 and 2,800 jobs from its IT department. The cuts, between 20 per cent and 30 per cent of the total IT department, are likely to be mainly focused on high-cost locations such as the UK and US.
A spokeswoman for Shell said: “We signed a master service agreement with Wipro and IBM on February 13.” She would not confirm the value of the deal or how many jobs would be affected by the contract.
Wipro turnover exceeded $1bn for the first time last year. Shell hopes to save $850m with the move.
One manager at Shell contacted The Register to complain that cost comparisons used to justify the offshoring project were not carried out fairly. These tests showed Shell was 40 per cent more expensive that industry standards – while the real figure should have been about equal. He blamed most of the IT overspending on overruns in costs for the Global Desktop Project (GID) from IBM.
He also raised concerns that levels of service will suffer without local staff with local and intimate knowledge of systems. The source claims Shell has, or had, the technical skill to carry out big projects, but they are outsourced to consultants instead, because it lacks the business confidence to do it itself. ®