Shell Inks Huge IBM-Wipro Offshore-Outsourcing Deal

European petroleum giant Royal Dutch/Shell Group has inked a far-reaching IT services agreement with IBM and Wipro Technologies in what media reports in India are describing as the biggest single

May 3, 2004

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European petroleum giant Royal Dutch/Shell Group has inked a far-reaching IT services agreement with IBM and Wipro Technologies in what media reports in India are describing as the biggest single IT offshore-outsourcing deal yet.

Wipro chief operating officer Rohit Kumar says a deal has been signed. Press reports from India, where most of the work will be performed, indicate the deal is worth more than $1 billion, though Kumar declined to disclose the agreement's value. "The opportunity is tremendous," he says.

Wipro plans to hire new employees as part of the contract and to transfer existing Wipro employees to the Shell contract. Kumar says that while Wipro may work collaboratively with IBM on some aspects of the deal, "it's my understanding that most projects will be handled independently." Wipro maintains virtually all of its IT support centers in India, while IBM has been building its capacity in that country to serve a growing list of customers looking to take advantage of India's low costs and highly skilled IT workforce. An IBM spokesman declined to discuss the deal.

Shell is reportedly looking reduce its IT head count by 30% over the next several years. The company employs about 9,000 IT workers and is hoping to save about $850 million as a result of the moves. Shell officials were not immediately available for comment.

A source close to deal says a disgruntled Shell employee leaked word of the outsourcing plan. As in the United States, the offshoring of IT and services jobs is becoming a contentious issue in Europe as more white-collar jobs move from the United Kingdom, Germany, France, and other European Union countries to low-wage locations such as South Asia and Eastern Europe.

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