Amex-IBM deal leaves 2,000 ITers facing culture change

Job security: Outsourcing one's entire IT organisation is clearly the fashionable thing to do, to judge by recent deals. As...

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.

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