Once worries about their jobs, pay, and benefits died down, American Express Co. employees became enthusiastic about moving to International Business Machines Co. through an outsourcing deal, according to an Amex senior vice president.
Over the 14 months the deal was negotiated - it was signed in February - senior Amex executives met with many of the 2,000 or so employees who would be moved over if a deal came to pass, Steve Karl said.
The meetings were meant to assure them that the winning contractor would offer jobs to the "vast majority" with comparable pay and benefits, said Mr. Karl, Amex's senior vice president of technology operations.
Amex invited Electronic Data Systems Corp., Computer Sciences Corp., and IBM to bid on the contract. (EDS eventually withdrew, Mr. Karl said.) The day before formal negotiations began, he said, Amex told the employees why it needed to investigate outsourcing.
It knew it was taking a risk in informing them so early, Mr. Karl said, but was "very concerned about being able to retain the very best employees particularly."
"We did not want attrition."
Many questioned whether outsourcing was the right thing for Amex, Mr. Karl said. Those closest to retirement were the most worried about their own prospects, he said.
Within a few weeks the company had developed a set of principles assuring workers they would get comparable treatment from the vendor that was ultimately selected, Mr. Karl said.
Despite the assurances, there was naturally a wave of fear. But Mr. Karl said that by the time Amex had signed a seven-year, $4 billion outsourcing agreement with IBM Global Services, employees were telling top executives they would be disappointed if the deal fell through.
"Believe me, they did not have that mindset early on, or even midway," Mr. Karl said.
J.P. Morgan Chase & Co., which also seems poised to sign a big outsourcing deal with IBM, has said it is communicating constantly with employees to minimize nervousness.
Amex took the same approach, encouraging employees around with world to interact with those of the bidding vendors, Mr. Karl said. It kept up a running e-mail dialogue with the workers, and conducted town hall meetings around the world to answer questions, he said.
The evaluation team conducted 700 to 800 face-to-face meetings and conference calls with the bidders in an "exhaustive and highly interactive" process, Mr. Karl said. "We spent a lot of time explaining, responding and clarifying."
Participating in the negotiations helped employees understand the value and strength of the different options from a technical perspective, he said.
Equally important, Mr. Karl said, was the exposure Amex employees got to the cultures of the outsourcing firms and the caliber of their people. "We wanted them to get a feel for what it would be like to work for these companies."
In the end, nearly 100% of the Amex employees were offered jobs at IBM, and 98% accepted one, Mr. Karl said. More than half of those who did not retired, he said.
Furthermore, Amex's attrition rate in the technology department remained at historical rates - between 5% and 6% a year - throughout the 14-month evaluation, he said.
By the time the process was over, most of the Amex employees had become convinced that their career prospects were better at IBM Global Services, which has 150,000 information technology professionals, than at a financial company, Mr. Karl said. On May 1 in the United States and in July elsewhere, virtually all of the designated Amex technology employees became IBM employees.
During this first year the focus is on ensuring a smooth transition and preparing for changes to ensure the hundreds of millions of dollars of savings that Amex expects over the life of the contract.
IBM is obligated to employ the Amex employees for a certain period - less than two years for most. Ten to 20% - those Amex deems crucial - must remain on the account for at least two years, Mr. Karl said.
Over time, he said, IBM will probably pull processing from Amex's data center in Phoenix, where it has the highest concentration of technology employees, into IBM facilities around the country. As that happens, the Phoenix employees will probably be assigned to other IBM clients, he said.
Once the employment guarantees from IBM are up, the security of the transferred jobs will be subject to the prevailing economic climate. But the workers "will be no more or less disadvantaged by being with IBM versus Amex," Mr. Karl said, "and their career opportunities at IBM are probably greater."
Many workers at Morgan Chase may already be resigned to working for an outsourcer, said Larry Janis, a managing partner at Integrated Search Solutions Group LLC, an executive search firm for information technology professionals in Port Washington, N.Y.
Outsourced employees tend to keep their jobs, with no pay cuts and no changes in benefits, Mr. Janis said. The move "sounds more traumatic than it actually is."
