The Sunday Telegraph: Shell plans to outsource 3,600 jobs

By Russell Hotten
Last Updated: 11:21pm GMT 29/12/2007

Royal Dutch Shell is to shed thousands of jobs as Europe’s largest oil company joins rival BP in trying to cut costs and simplify its structure. Shell is looking to agree one of the largest ever outsourcing deals in the next couple of months, and plans to reorganise other departments, including finance operations.

The company has said previously that it wants to cut costs, but the scale of some of the proposed changes has surprised insiders and led to the leaking of information to an anti-Shell website by disillusioned staff. The biggest change will be in the information technology division, where around 3,600 staff may be affected by a plan to farm out operations to three companies.

At a board meeting thought to have taken place shortly before Christmas, Shell decided to outsource virtually the whole of its IT function, nominating EDS, AT&T, and T-Systems to take over the work. Starting on January 8, Shell is planning a series of what it calls Facing Change meetings with staff to outline further details.

Shell declined to discuss the number of staff involved, though in an e-mail written by Goh Swee Chen, vice president of Information Technology Infrastructure, the outsourcing plan presented to the board is described as “substantial” and likely to create “uncertainty”. Negotiations are continuing but Shell wants the new IT arrangements up and running by July 1.

The e-mail, confirmed by Shell as authentic, was sent to the website royaldutchshellplc.com, which has been a thorn in the company’s side for years and is regularly used by staff to air their discontent and disclose sensitive information. One employee who contacted the website said the plan was to retain 400 IT staff at Shell, with the work of the remaining 3,200 outsourced.

He wrote: “To be fair to Shell we have been aware of the outsourcing for at least 6-8 months. It was not until very recently however that we found out which jobs were mapped to be outsourced, and who is taking over the contracts…working for many years and giving to a company, to all of a sudden be encouraged to join an outsourcer has a feeling of betrayal to it.” One outsourcing expert said on Friday that if 3,200 staff were involved, it would be among the biggest such deals he had heard of.

Shell said it had announced in September it would contract out some IT work. “We are looking at ways of creating greater synergies.” Shell employs about 108,000 people.

News that the IT plan is likely to be far bigger than first envisaged has sparked wider concern about job cuts. According to another leak, to the Dow Jones news agency, Shell’s financial director Peter Voser has told staff that he wants a “leaner and meaner” department in 2008, a sign that he intends to strip out layers of management.

In an interview with Dutch newspaper de Volkskrant earlier this month, Shell’s chief executive, Jeroen Van der Veer, said that production costs had risen 65pc in two years.

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/12/30/cnshell130.xml

THE LEAKED EMAIL

—–Original Message—–
From:     Gorelova, Svetlana SITI-ITI   On Behalf Of Goh, Swee-Chen SEPL-ITI
Sent:    December 19, 2007 8:29 AM
Subject:    Infrastructure Sourcing Programme – Final Investment Decision
This message is sent out on behalf of Swee Chen Goh
__________________________________________________________
Royal Dutch Shell Chief Executive Jeroen van der Veer approves proposal to outsource a substantial part of IT infrastructure services to three suppliers.

IT Services receives mandate to complete contract agreements with selected suppliers.

Dear Colleagues,

2007 has been a very busy year for all of us, both in terms of sustaining our service delivery as well as in dealing with change.  Early December the Infrastructure Sourcing Programme (ISP) submitted the proposal to outsource a substantial part of our IT infrastructure services to the RDS Board.  On behalf of the RDS Board and Executive Committee, our Chief Executive Jeroen van der Veer has reviewed and approved our proposal.  We will therefore proceed with implementation in 2008.

After short-listing six suppliers in September 2007, and due diligence work in October, the ISP team requested and received Best and Final Offers from six suppliers in November.  These offers were evaluated and ranked, using a set of criteria that balanced operational, people and financial aspects.  This has led to the proposal to outsource the Infrastructure service bundles to the following suppliers:

•    End User Computing Services: EDS
•    Hosting and Storage Services: T-Systems
•    Managed Network Services: AT&T

Subsequent to the approval, the following steps to implement will now be taken:
•    The selected suppliers have been invited to finalise contracts, which we expect to be signed at the end of March 2008.
•     Staff consultation as legally required will commence from January onwards.
•     New and significantly changed jobs in the new IT Infrastructure Organisation will be posted on Open Resourcing (OR) from December 21 until January 25.  Staff appointments will be announced in February and March 2008.
•     Establishing the new IT Infrastructure Organisation and onboarding of staff will be prepared during the first and executed during the second quarter of 2008.
•     Transfer of services to suppliers, involving the transfer of staff, contracts, assets and in-flight projects, will be planned and prepared during the first half of 2008.  Service commencement date is targeted for July 1, 2008.

To keep you informed and engaged, important communication has been scheduled:
•    Webcasts for all IT Infrastructure staff on background of the supplier selection and the next steps will take place on January 8, 2008.
•    Facing Change Event 2 will start on January 8 in the hub-locations, providing an opportunity to meet the selected suppliers and learn more about their employee value proposition.
•    The ISP newsletter will be issued end of January, with further details on the planning and preparations for service transfers and activation of the new IT Infrastructure Organisation.

In the meantime, Shell will continue to rely upon its current suppliers of IT infrastructure services.  In due course, we will engage with these suppliers to discuss the future working relationship.

You will find more information on the way forward, in particular around the timeline and the open resourcing process, in the latest issue of the Infrastructure Sourcing Newsletter.  I would like to encourage you to regularly check the Programme website at: < http://sww.shell.com/it/infrasourcing/index.html>

This announcement may lead to an increase in external enquiries.  We are carefully managing this process, but in case you are approached directly, please refer all enquiries:
•     from suppliers to Ann Perrin (Strategic Relations) at +1 832 512 7315;
•     from any other external party to Sarah Smallhorn (Media Relations) at +44 7768 773 202.

I acknowledge that there will still be uncertainty as we are working through the finalisation of contracts, open resourcing and transition preparations.  I encourage you to keep an open mind and take the time to learn more about the suppliers as employers and as business partners.  As always, members of the IT Services Leadership Team are available to answer your questions.  Please do not hesitate to reach out to them.

Kind regards,

Goh, Swee Chen
Vice President IT Infrastructure