At Hertz IT, sheriffs, shock and tough choices

Around 75 of 300 Hertz IT workers will move to IBM

Credit: iStockPhoto

Mass IT layoffs are often small and unnoticed. They are not on the scale of the Carrier air conditioning plant layoff; its Indianapolis facility, which currently employs 2,000 people, is moving to Mexico.

Hertz IT employees share two things with the Carrier workers: They were also angry, and they got the news on the same day, Feb. 10.

The Carrier layoffs arrived guillotine-like; the plant is closing, period. But IT layoffs are rarely like that. There are ambiguities and uncertainties and lifeboats for some, and so it was at Hertz.

In an early morning conference call, Hertz's IT employees were told by the CIO the firm was expanding its outsourcing work with IBM. It wasn't known then how many would lose their jobs or ultimately be hired by IBM.

But one month later, this much is clear: About 300 Hertz IT employees, most located in Oklahoma City, were impacted by this decision. IBM is hiring about 75 and those workers are expecting to receive offers today. The layoffs will begin this month and be completed by May 31, said Hertz. It's not yet clear if all the 225 or so employees who are not receiving job offers from IBM will be laid off.

After the conference call, employees were stunned. The reaction was, "We're screwed," said an IT employee, one of two interviewed, who requested his name not be used.

There was "anger, resentment," especially by employees who "sacrificed that work/life balance to keep things going here," said the employee.

Hertz took precautions. On the day that IT employees learned that their work was shifting to IBM, employees noticed Oklahoma sheriff patrol vehicles in the building's parking lot. They believed plainclothes officers were inside the building.

Hertz explained the security decision. "We consider the safety and security of our people whenever there are circumstances or events that could increase the risk of a disturbance or some form of workplace violence," said Bill Masterson, a Hertz spokesman.

"Knowing that this was a difficult announcement, we had additional security on hand," said Masterson. This security was in place from Wednesday Feb. 10 through Friday, Feb. 12.

There were two opinions about the security, said the employees. Some saw it as prudent, while others thought it a sign of distrust. There were no reported problems.

Once the initial shock passed, Hertz IT employees had to make difficult choices.

Employees' severance packages range from four weeks to a year, said Hertz. For the long-term employees expecting a large severance, a job with IBM may not be worth it.

"I don't think anybody thinks that being rebadged to IBM is anything other than a one year-stay of execution," said another IT worker.

Prior experience feeds the concern that IBM jobs may be relatively short-term. IBM has been working with Hertz for some 20 years, and employees have seen what happens to rebadged employees in previous outsourcing expansions. Many employees were cut after a year.

All laid-off employees can apply for IBM jobs. For those who get them, the process works like this: First IBM will ask them if they want an offer. If employees say "no" before receiving a final written offer, they can keep their severance. But if an employee accepts the IBM offer and then later rejects it, the severance may be lost.

IBM runs large offshore operations and its Hertz IT employees have been told that they will be involved in "shadowing," a term used to describe training replacements. Shadowing can be done in person, over the Web or as a combination of both.

IBM India Private Limited, a IBM subsidiary, has filed paperwork for H-1B visa workers for Hertz Technology offices.

For Hertz IT employees seeking new jobs outside IBM, problems await.

One potential employer, the oil and gas industry in Oklahoma City, only represents about 5% of overall non-farm employment. But it is tremendously influential because it generates a lot of money that spills over to other sectors, said Russell Evans, an economics professor at Oklahoma City University and executive director of the Steven C. Agee Economic Research & Policy Institute.

The oil and gas industry has been growing as an IT employer. But thanks to falling oil prices, IT employment in the oil and gas industry declined last year, according to research by industry group CompTIA.

"There are a lot of technology jobs, database management, database analytics, data science -- a lot of IT technology jobs that are being lost from our oil and gas companies right now as they engage in big personnel cuts," said Evans.

But manufacturing, which is increasing its reliance on technology, grew in Oklahoma City last year. The city is also home to a major U.S. Air Force base, Tinker, and a large Federal Aviation Administration facility that acts as a central registration agency for planes. These operations have produced a significant private aerospace presence.

Oklahoma City is also the state capitol. About one out of every five non-farm jobs are in the public sector, said Evans.

For at least the first half of the year, Evans sees a far-from-robust job market, particularly in high-end, high-skilled jobs, but with pockets of opportunity. How the local economy fares beyond the first half of the year will depend on national and global economic trends, he said.

With oil prices crashing, the Hertz IT employees are concerned about jobs. "Replacing the salary is not going to happen," a worker said.

Hertz's Masterson says, however, that the work with IBM "is expected to improve the delivery and reduce the cost of Hertz's existing IT services, many of which are on proprietary, legacy systems.

"Going forward, Hertz IT resources will be focused on development of future products and services for customers," he said. The majority of services will become cloud-based.

"This was a difficult, but necessary decision taken by the company," added Masterson. "Hertz is working to lower its operating costs company wide, and this includes a modernization program across several functions," he said.

Along with severance pay, benefits also include three months of outplacement assistance. IT employees can receive up to $4,000 toward retraining or skill certification, said Masterson.

One employee said he didn't see outsourcing expansion as having much impact. They tried this twice before, the worker said, "and Hertz is no better off than they were before," he said.

"I don't think this is good for Hertz or Oklahoma," the employee said.

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