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Zurich IT staff denounce cronyism of former CIO

Zurich: The departure of chief information officer Ian Marshall from insurance giant Zurich left IT staff struggling with low morale and a string of delayed projects. Staff worries centred on the company's broker system and also on the collapse of outsourcing negotiations with IBM. Nick Huber investigates.

When Ian Marshall was appointed chief information officer for general business at Zurich Financial Services UK in 2000, staff reaction in the information services division was favourable.

Since the merger between Allied Dunbar and Eagle Star in 1998 Zurich had gone through a series of interim IT directors. "He was charming, smooth and urbane," one former member of the IT staff at Zurich said of Marshall.

However, concerns among some senior IT staff about the so-called "broker" system operated by Marshall soon begun to emerge. The system involved three industry consultants, who would talk to business managers and assess their IT requirements. After consulting IT staff the brokers would then give the business unit quotes for proposed IT projects.

Disquiet centred on the raft of people appointed as brokers by Marshall soon after he started at Zurich. Many had worked with Marshall before at various management consultancies.

Although it is common practice in all professions for managers to appoint people they have previously worked with, some IT staff at Zurich claimed that Marshall took the recruitment technique to an extreme. It was seen as cronyism and compounded resentment among senior IT staff who lost influence in the departmental shake-up.

"Marshall and his cronies were floating around somewhere between an ivory tower and cloud nine, presenting slides with great pictures and concepts," said one former senior manager at Zurich's IT department, who asked not to be named.

"Marshall gave some high-level presentations about the brokers and his strategy but it all seemed incredibly long-term. It was conceptual talk about setting up a communications hub. It was fairly typical consultant waffle."

A divide soon appeared between long-standing IT staff and the newly appointed brokers. While it is common for consultants to be viewed with suspicion and envy by IT staff, the intensity of resentment directed at the Zurich brokers was unusual.

"He had a very, very self-assured style," said one senior IT professional, recalling one broker. "He had a small model rugby ball and he kept throwing it to people as he walked around, in a jokey gesture."

After proposals for an outsourcing deal with IBM collapsed, Zurich IT staff were told to expect redundancies last December. Morale in the IT department nose-dived.

Nearly 200 staff were laid off at the start of this year. One IT professional at Zurich affected by the job cuts spoke of his mixed feelings on receiving his redundancy notice. "The day I was made compulsorily redundant and got my piece of paper it was a bit of a shock. But looking back I am very happy to be out of it," he said.

A spokeswoman for Zurich in the UK said that the broker system operated by Marshall was similar to the way business units were organised across Zurich, using account managers to liaise with different parts of the business.

She added that Marshall chose the management structure he preferred and that change and job losses within an IT department would inevitably be unpopular with some of the IT staff affected.

Marshall was not available for comment.

Can high-risk brokering pay?
The "broker" system adopted by Zurich's IT department is a high-risk strategy that can easily backfire, IT directors have warned.

Supporters of the system, which has been around in various guises for decades, claim that it allows a business to get better value from its IT department.

Under the system decisions about the delivery of IT services to the business - whether from in-house staff or from an outside supplier, are based on who can deliver the highest quality and most cost-effective service.

"I'm an advocate of the service broker model because it allows you to get the best value by potentially buying the best value service, whether externally or internally," said Colin Beveridge, an interim IT director who has worked at a variety of FTSE 100 companies.

"Powergen did this years ago and it worked very well," he said.

Although few companies have adopted the broker model it has become an accepted model for running a large IT department.

However, an industry expert warned, it can alienate existing IT staff if newcomers are drafted in as brokers with little or no knowledge of the business culture.

Recruiting senior managers from outside a company to oversee a revamped IT department can fuel existing resentment, according to David Rippon, chairman of Elite, the British Computer Society specialist group for IT directors.

"When a new person comes into an IT department and appoints his own people, the people who are already in the IT department get pissed off. It is inevitable," said Rippon.

He declined to comment specifically on the Zurich case, but said, "It is usually a recipe for disaster. The new guy appoints first-line managers who do not understand the culture of the business."

To maintain staff morale industry experts advise firms to limit the number of senior managers who are appointed to an IT department during a reshuffle. "The key is to motivate existing IT staff and make them feel more valued," said Rippon.

Deal should have protected IT staff jobs
The 11th-hour collapse of a proposed outsourcing deal with IBM last year has cast a long shadow over Zurich UK's IT strategy.

Nearly 200 IT staff were laid off after negotiations ended last year - more than one third of full-time IT staff at the general services division of the financial services giant. Ironically the deal was touted by Zurich management as a way to safeguard jobs. Instead, IT staff spent Christmas waiting to hear whether they still had jobs in the new year after the likely scope of the redundancies was outlined in December.

The planned five-year contract, which would have been worth about £400m to IBM, according to sources close to Zurich, would have seen nearly half of Zurich's IT staff transfer to IBM Global services. Negotiations broke down in September - seven months after the outsourcing proposal was announced. Outsourcing experts said that the demise of the deal highlighted the cultural and operational challenges facing companies trying to negotiate outsourcing contracts.

The original proposal - part of drive to cut costs across the Zurich business - was supposed to save Zurich £60m in IT costs over five years.

It would have been Zurich's first major outsourcing deal in the UK but, despite seven months of intensive negotiations, the parties were unable to agree the details.

In a statement to Computer Weekly at the time of the collapse of negotiations David Carrie, the chief information officer for Zurich's non-general business in the UK, said the negotiations with IBM had been ended by mutual consent. An IBM spokesman said that the scope of the deal had changed.

In an unusual twist both companies indicated that they were still negotiating to try to thrash out a revised deal but it never materialised.

Union leaders had backed the proposals in the belief that it would safeguard the jobs of Zurich IT staff.

The proposal had been sold heavily to Zurich IT employees according to sources close to the company. IBM presentations had emphasised the greater career opportunities that a deal would offer IT staff.

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