Job security: Outsourcing one's entire IT organisation is clearly
the fashionable thing to do, to judge by recent deals. As American
Express joins the rush to cut costs, Nick Huber asks, what about
the workers?
If size really does matter in outsourcing, last week's $4bn
(£2.8bn) deal between American Express and IBM Global Services
should leave those who put it together feeling pretty smug.
In what is thought to be the biggest outsourcing deal in the
financial sector to date about 2,000 American Express IT staff will
be offered comparable positions at IBM and could transfer to their
new employer over the next few months.
But while analysts have debated the pros and cons of companies
signing long-term multibillion-dollar IT outsourcing deals there
has been surprisingly little consideration so far of the effect of
such deals on the IT professionals involved.
The mechanics of the deal appear relatively straightforward.
American Express, which runs one of the world's largest IT
infrastructures, has said it expects to save hundreds of millions
of dollars over the seven-year contract.
IBM will run American Express' computer systems and its Web sites
worldwide, and provide the necessary computing skills and
resources, while American Express will retain control of IT
strategy.
As you would expect IBM, the world's largest IT services provider,
has emphasised the opportunities that the deal offers IT
professionals at American Express. These include a "favourable"
employment package; the chance to work on other IT projects in IBM;
and the opportunity to work abroad.
But that still leaves crunch issues such as job security and
changes in corporate culture for IT staff to get to grips with. IBM
points to a thorough induction programme, which gives IT staff
months to acclimatise to their new roles - if they decide to move
across through the deal. This induction process will feature
so-called roadshows, often including IT staff who have joined IBM
from earlier outsourcing deals.
Job security cannot be guaranteed but IBM argues that this maxim
applies to most jobs in the modern economy.
But the move from working in an in-house corporate IT department to
a global consultancy can still be a daunting one - particularly
given the uncertain economic climate.
One senior IT manager in the City, who asked not be named, has
experienced first-hand the demoralising effect that outsourcing
deals can have on IT staff.
The main problem stems from the culture clash between working in a
company's IT department and joining a more aggressive and
sales-driven consultancy.
"When you're working for a company's IT department you will have
broadly similar objectives which involve doing things for a certain
amount of money, ideally reducing costs, and to a certain quality,"
he said. "But for a large outsourcer IT people are not assets.
Unlike the sales people they are not actually bringing in
money."
IT staff moving from in-house to a services provider will also have
to adjust to working under sales staff, rather than a technical
manager. "Your manager will be a sales person, even if they're
called a business development manager," the IT professional added.
"The more money a services provider makes from a client the happier
they are. But this is actually very stressful for most technical
people who don't like selling. They find it quite degrading."
The other main challenge facing IT professionals who transfer to an
outsourcer is job security. Someone who only has experience of a
company's obscure and custom-built reporting system is going to be
of limited use to a services provider which wants staff with
experience in Java programming and XML-based systems.
Meanwhile, however, the bandwagon for mega outsourcing shows no
signs of slowing down although analysts and IT managers are divided
over the wisdom of such deals.
Robert Morgan, chief executive of outsourcing advisory consultancy
Morgan Chambers, said that the IBM-American Express deal
highlighted its strategy for going for massive contracts that few
rivals would be prepared to bid for. However, he raised doubts that
American Express and IBM will actually hit the cost savings target
announced as part of the deal. "I'm very sceptical about whether or
not they will hit the hundreds of millions of pounds [cost saving
target]," Morgan said, "because of the complexity of the deal and
the change [it involves]."
If American Express decides to change its business model halfway
into the deal it will have to ring-fence this from the original
outsourcing deal to avoid paying IBM extra money, he added.
Surviving outsourcing
- Learn how to market yourself in order to get the job you want;
although outsourcers do not like to admit it you will effectively
have to re-apply for your old job or at least justify your
role
- Make sure your CV is up to date: highlight experience, such as
in Java programming or project management, that outsourcers look
for
- Consider sending your CV out to other employers - this may
sound pessimistic but you may not like your new role or the
company's different culture
- Consider joining a union if you are not in one already:
although some see it as political decision union membership can
serve as a safety net when you most need it
- If you do decide to transfer to the outsourcer but have
reservations, keep them to yourself - as one IT veteran put it,
"When people have been sold like goods in an outsourcing deal they
become quite uncertain and this fear can make people
rude."
IBM's big bites at the cherry
February 2001
Pharmaceuticals giant AstraZeneca outsources
its IT to IBM Global Services in a £1.2bn deal
March 2001
CGNU scraps seven-year £124m outsourcing
contract with IBM after only two years. The recently-merged
insurance giant said its decision to abandon its Perth datacentre
was part of a drive to consolidate IT systems
November 2001
Planned £400m outsourcing agreement
between Zurich Financial Services in the UK and IBM Global Services
collapses at the eleventh-hour. This would have seen nearly half of
Zurich's IT staff transfer to IBM Global Services
December 2001
Global travel and real estate giant
Cendant Corporation signs a £0.96bn IT services deal with IBM. This
is believed to be one of the travel industry's largest-ever
outsourcing contracts
December 2001
Royal & Sun Alliance outsources the
bulk of its IT infrastructure in the UK to IBM. Nearly 3,000 IT
staff at Royal & Sun Alliance are due to transfer to IBM this
year.