Shell signs $4B multisupplier outsourcing deal

Contract divvied up among AT&T, EDS and T-Systems

Royal Dutch Shell PLC has signed a five-year, $4 billion outsourcing deal with three global IT and telecommunications suppliers.

Shell, which is based in the Hague, Netherlands, announced that it has contracted T-Systems International GmbH, AT&T Inc. and Electronic Data Systems Corp. under a master service agreement for "significant improvements" to its efficiency and productivity that will include the axing of some tech jobs and a transfer of 3,000 IT staffers to the service providers.

Under the agreement, effective July 1, Shell said it will outsource its IT infrastructure in three service bundles: "AT&T for network and telecommunications, T-Systems for hosting and storage, and EDS for end-user computing services and for integration of the infrastructure services."

Shell said it anticipates "minimal redundancies" as a result of this change.

Shell's IT organization provides IT services to more than 150,000 users in more than 100 countries. The organization has a total of about 8,000 staffers, including employees and contractors, who manage its IT applications and infrastructure.

The company's infrastructure division is staffed by 3,600 employees and contractors in 65 countries. The majority of them are in Shell's four IT delivery hubs in the Netherlands, the U.K., the U.S. and Malaysia. As a result of this deal, 3,000 workers will relocate, and Shell will retain an internal infrastructure division manned by 600 people.

The suppliers will provide integrated services to more than 1,500 sites worldwide.

Elesh Khakhar, a partner at consulting firm TPI, which is an adviser to Shell, said this is the largest deal Shell has signed in the past five years. "Shell's approach combines all the advantages of a decentralized service provision with the benefits and efficiency of a centralized governance structure," Khakhar said.

Khakhar added the multisupplier deal was designed to "encourage collaborative behavior" between suppliers, while allowing Shell to "retain full control of strategy and service integration."

"In addition to all of the usual business benefits, Shell will be able to exploit emerging commoditized services designed for the consumer market, such as e-mail or Internet phone services, and integrate them within their services when they become robust enough for commercial use," Khakhar said.

According to Shell CIO Alan Matula, "this deal is a major strategic choice for Shell. Partnering with EDS, T-Systems and AT&T gives us greater ability to respond to the growing demands of our businesses. It allows Shell IT to focus on information technology that drives competitive position in the oil and gas market, whilst suppliers focus on improving essential IT capability."

The value of Shell's contracts for the three suppliers is $1.6 billion with AT&T, $1 billion for EDS and about $1.5 billion with T-Systems.

This story, "Shell signs $4B multisupplier outsourcing deal" was originally published by Computerworld UK.

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