Shell signs £2bn multi-supplier outsourcing deal

Royal Dutch Shell has signed a five year, $4.0 billion (£2.04 billion) outsourcing deal with three global IT and telecommunications suppliers.

Shell announced it has contracted T-Systems, AT&T and EDS under a master service agreement (MSA), for "significant improvements" to its efficiency and productivity that will see an axing of some tech jobs and a transfer of 3,000 IT staff to the service providers.

Under the MSA, which starts 1 July 2008, Shell 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.

The Shell IT organisation provides IT services to more than 150,000 users in over 100 countries. The organisation has 8,000 IT people in total, including employees and contractors, that manage its IT applications and infrastructure.

Its infrastructure division is staffed by 3,600 employees and contractors located in 65 countries, the majority of which are in the four Shell IT delivery hubs located in the Netherlands, the UK, the US and Malaysia. As a result of this deal, 3,000 staff 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 consultant firm TPI which is an advisor to Shell, said this is the largest deal Shell has signed in the last five years. "Shell's approach combines all the advantages of decentralised service provision with the benefits and efficiency of a centralised governance structure."

Khakar added the multi-supplier deal has been designed to "encourage collaborative behaviour" 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 commoditised services designed for the consumer market, such as email or internet phone servies, and integrate them within their services when they become robust enough for commercial use."

Chief information officer at Shell, Alan Matula, said: "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 the contracts for the three suppliers is $1.6 billion (£804 million) with AT&T, $1 billion (£500 million) for EDS and €1 billion (£795 million) with T-Systems.

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