Shell standardising operations in $3bn saving drive

Shell standardising operations in $3bn saving drive

Job cuts also on the horizon, potentially affecting IT staff

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Royal Dutch Shell is driving forward an aggressive standardisation, simplification and offshoring programme in an effort to slash $3 billion (£1.9 billion) from costs.

The oil giant also plans to cut 1,000 jobs, in addition to 5,000 last year, after reporting that earnings freefell nearly 70 percent to $9.8 billion (£6.2 billion) for the year to 31 December. It did not say whether IT staff were affected, though extensive offshoring has hit IT jobs in the past.

In 2008, Shell signed £2 billion worth of deals with EDS, T-Systems and AT&T. Additionally it has an application support deal running with IBM, Logica, Wipro and Accenture. At the time, it announced it would lay off 3,200 in-house IT staff.

The company last year reportedly cut the pay of IT contractors by 12 percent.

Shell has reorganised its IT from multiple departments in different parts of the company and different geographies, into a new 10,000 strong Projects & Technology wing. That 'Transition' programme is now complete, having removed $2 billion from costs in a year.

Shell plans for another $1 billion savings in 2010, taking the total to $3 billion in two years, through the standardisation and offshoring programme, as well as improving its supply chain and changing corporate spending.

“Cost focus is now embedded in our day-to-day operations,” said Peter Voser, chief executive at Shell, in a statement to investors.

“For 2010, we are targeting a further underlying cost reduction of at least $1 billion, and a reduction of some 1,000 employees. Much of this will come from downstream [activities such as oil refining] and ongoing cost initiatives in the corporate functions.”

The new Projects & Technology division, created last year, had made “better technical integration on bigger projects and a sharper innovation focus along the value chain”, he said.

In a recent interview, Shell chief technology officer Gerald Schotman said the company was working to speed up technology development, through the use of Lean methodology. This would, he said, in some cases cut years from development and testing. The comapny is also using more off-the-shelf products where it judges money can be saved.


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