Ovum on: T-Systems Secures More Business and Reveals Plans for Further Job Cuts

by Cornelia Wels-Maug, senior analyst at Ovum

"T-Systems has announced the extension of a three-digit million euro deal with Finanz Informatik (FI), the newly merged entity of the two remaining IT service providers to the German savings banks, until 2013. Under the agreement, T-Systems will enter into a technology partnership with FI and will design and build an Internet-based voice and data network which will replace the existing data network."

"Furthermore, in line with earlier notifications from CEO Reinhard Clemens, T-Systems has introduced a voluntary redundancy scheme to cut further jobs."

"Alongside T-Systems' announcements of deals with new accounts, the most spectacular being the Shell contract it won in March of this year, this most recent renewal points to another important source of income: the extension of business with existing clients. Clemens has stressed the importance of increasing the share of wallet with existing clients. In this case, T-Systems managed to expand the scope of the contract by including the voice network part, whilst employing the latest technology. In contrast with the existing contract, T-Systems entered into a technology partnership with the client. Though no further details have been released on this, this step might have become necessary in order to get both newly merged IT service providers, Sparkassen Informatik and Finanz Informatik, on board. The newly created entity, FI, generates combined annual revenues of about Ђ1.6 billion and has amongst its clients about 450 saving banks with a total of 16,000 branches."

"The second part of the news, regarding the announcement of the voluntary redundancy programme, looks on first view like a continuation of Deutsch Telekom's HR policy of 'socially acceptable job reduction'. In this way, Deutsche Telekom has been able to cut about 10,000 jobs annually since its privatisation in 1995. This time round, the proposed scheme, which employees can take up between September 2008 and February 2009, is not the last resort. Thomas Sattelberger, Chief Human Resources Officer, points out that "should the socially conscious measures not suffice, however, I will ultimately be unable to rule out compulsory redundancies." This is a change of direction for Deutsche Telekom, which so far has always ruled out compulsory redundancies. However, it remains unknown how many voluntary redundancies are needed before T-Systems will have to enforce compulsory redundancies. It is an obvious fact that T-Systems has overcapacities, particularly in Germany, and that its management will take measures to address those. Its recent strategic alliance in the field of systems integration with Cognizant has given T-Systems access to a large pool of lower-cost resources in offshore destinations and hence increased the pressure to reduce in-house workforce. Should T-Systems engage in further alliances or make acquisitions, additional job cuts will be on the table again."

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