When is offshoring ineffective?

Offshoring - The Right Way for Service Unit Systems Integration?


1 No. 8 / October 2005 Offshoring - the right way for the Service Unit Systems Integration? The upper management of the Service Unit Systems Integration (SU SI) has decided to further internationalize the provision of services. This should also be done through the establishment of a T-Systems India Production Center and the possible use of offshoring capacities as a result. By the end of 2005, around 1000 employees were planned for this center. The trigger for the decision was, on the one hand, corresponding customer demands and, on the other hand, the hope of being able to offer systems integration services more cheaply by adding low-wage components. Just a silver lining or a mirage. For us the question arises whether offshoring can be a successful solution. After flying through several learning curves in the last 12 months, it is not evident that it will turn into a success story. With very few exceptions, it turned out that the high-flying plans of the strategists often ended with a painful belly landing (in an extreme case, not one line of productive program code should have been generated after using 1.5 man-years of offshoring capacities!). When the productivity of a developer in India continued on page 2 dear readers, after a long time you are once again holding an issue of cuts & mouse in your hands. A lot has changed at T-Systems since our last issue. Whether for better or for worse is an open question. In addition, one company motto chases the other. The objectives set differ, but we have to be careful that savings in personnel and more bureaucracy are not the only results that emerge. Every given program from above seems to entail its own additional bureaucracy here. The appearances of the management at customers under the motto five days with the customer may be a nice marketing gag, but how about if the management would spend five days with the own staff at the base? For about two years now, discussions have been taking place with the employer and various works council bodies about adapting the works council structures to the necessary requirements. Various model visions were therefore created and then discarded. In the early summer of this year, two variants emerged. One variant included the cross-service unit works council committees like the Leinfelden joint works council in the considerations, while the other model was very much related to the service unit and consequently would have left a colorful bunch of works council committees at our Leinfelden location, which of course would have been easier to play off against each other. We IG Metall-Betriebs- continued on page 2

Two councils observed this development with skepticism and - by forcing the resignation of the works council, took a position in order to set up the BR structure that already existed in LE for a further four or five years. Despite some everyday problems, we are of the opinion that the model of joint works council for large locations like LE is a model that will continue to exist in the future before changes in the corporate structure and does not result in a works council election after every reorganization. In addition, further changes prove us right, which are to be expected, among other things, from the departure of Mr. Rudnick - in the Service Unit Systems Integration in the direction of ITO and SSM. These restructurings can be better managed with a works council that knows the whole store and can think outside the box of its own service unit. The new election of the works council, originally planned for September 27, was withdrawn by the electoral committee, as it turned out that in a few exceptional cases the announcement for the works council election was not known to all branch offices and therefore colleagues might not have been able to apply for election. At this point, respect should be paid to the electoral committee for this courageous decision, which at the moment brings a lot of additional work, but benefits democracy. In our opinion, the electoral board will reschedule the works council elections in the next few days. But don't worry, the old committee will be in office until the new election and we IG Metall works councils will be there for you as before. We would like to convince you, dear voters, with our work and its presentation in our publications such as cuts & mouse / shortcuts. I hope that our publications and the topics they contain will help you to get interested in our work and of course to choose the IG Metall list for the upcoming works council election. Arne Großmann is only 50% compared to the local one, the cheapest working hour suddenly costs 40 instead of 20! The nicely colored project calculation with respectable profits becomes waste. It should be expressly stated here that this is not due to the skills and commitment of the Indian colleagues. A brilliant move On the paths taken so far, it can be assumed that the vast majority of system integration services are not suitable for offshoring. This realization has recently at least partially spread - also in the upper management level. In the new approach, the Indian colleagues are now to be more closely integrated into the respective units (Project Center / Application Service Center) in Germany. It is believed that this will put a stop to the rampant fluctuation in India. At the same time, the gentlemen came up with an ingenious move: services planned for India must definitely be paid for by the Project and Application Service Centers in Germany, regardless of whether capacities can be called up or not. This is intended to inspire the imagination of the PC and ASC managers to look even more intensively for ways of using capacity. It is accepted that a further piece of long-term system development experience has to be sacrificed for this. It is to be feared that with this move the game will be won by the management and the PC and ASC leaders will be checkmated. If there is already a business plan offshoring, then consistently. The additional costs often make the ambitious profit targets even further afield. The result is the demotivation of the management staff. Offshore costs are only manageable where you can draw on the bacon from the existing business. Nevertheless, this cannot be a cause for carelessness, because the profit targets of the SU SI as a whole are negatively influenced by these burdens. The variable portion of the annual target salary for colleagues will suffer as a result. We think: A realistic business case for offshoring must leave the costs where they are incurred. Underutilized staff in India are to be booked at T-Systems India and not in Germany. Management's travel expenses incurred in connection with the use of offshoring capacities must be properly allocated. You are not allowed to drive up the imputed manufacturing costs with us. We expect that those responsible in upper management carry out a correct and fair calculation of their own system development services. Securing inexpensive young talent, using local capacities A fatal consequence of the path that has been taken since then is that urgently needed young talent for system development activities is not trained and built up with the appropriate emphasis. The age structure of the workforce in the SU SI will continue to deteriorate and the associated average personnel costs will develop unfavorably. This means that Germany is becoming even more expensive as a location and is driving the need for a worse offshoring solution even further. We metal workers believe that this is one of the reasons why the training of IT specialists in-house must be further promoted and increased. In an intermediate step already practiced today, local external capacities from research-related institutes such as the Steinbeis Foundation are successfully used at lower hourly rates in some areas of the SU SI. In the past, this has repeatedly offered opportunities to recruit qualified personnel at low cost. The construction T-Systems India T-Systems India is designed exclusively as an extended workbench for the German market because it has considerable tax advantages in India. On the other hand, these special conditions mean that T-Systems India employees are not allowed to work for customers on the Indian market. If these shackles fall away in the distant future, then the promising domestic market on the Indian subcontinent has already been conquered by the competition and T-Systems is chasing after. Missed time or ran after a fashion trend? The impression arises that, at the insistence of powerful customers or the supposedly cheap addition of low-wage services, an offshoring business case was hastily set up. Important prerequisites, such as certification according to CMMI (Capability Maturity Model Integration), were addressed too late, which has contributed to the fact that important orders have already been lost. The decision in favor of offshoring in its current form must fundamentally be re-examined. Creativity is required from management. (Peter Schmid, GBR delegate SU SI, member of the group economic committee)

3 The head office The head office knows everything better. The head office has the overview, the belief in the overview and a card index. The head office can't think of anything, and the others have to rave about the energy and drive of the subordinates. In the headquarters the men with infinite stench are doing it. The headquarters is a little more infallible than the Pope, but it doesn't look so good by a long shot. busy with each other, but they pat you on the shoulder and say: "Dear friend, you can do this from your The man in the practice doesn't have it easy." He doesn't judge individual items like that! We in the central office «complains terribly at the central office, tears up all of them. The central office initially has one main concern: to remain the central office. Grace God to the subordinate body that dared. Having done this, he marries the daughter of a head mime, Ukase in small pieces and wipes his eyes with it to do something on his own! Whether it was sensible or not, it advances and moves up to the headquarters, because it is a matter of whether it was necessary or not, whether there was a fire or not, advancement to get into the card index. Arriving there himself, he clears his throat, pulls the tie, pulls it: first the control center has to be asked. What else would it be headquarters for! For being the headquarters! notice cuffs just now and begin to rule: as absolutely you are. May those outside see how they get done! God-appointed headquarters, full of deep contempt for the In the headquarters sit not the clever, but the clever. Those who do their little work may be clever with their central colleagues - they sit there like the spider in simple men in practice, deep in the infinite stink - they are not clever. Because if it were, he would cleverly avoid the network that others have built, and here there is only one remedy: that is work, commands unreasonable things and knows everything better. Reform proposal. The reform proposal leads to education (This diagnosis applies to small child care institutions, foreign ministries, newspapers, health insurance companies, forest management - a new department which - of course - is subordinate to, attached to, added to the headquarters around - they form the headquarters. A hearty exaggeration that does not apply to a company: for yours.) 1925 Kurt The headquarters is an institution that serves to approach Tucholsky

4 There is no shortage of work! My everyday life as a works councilor Extensive, lively, intensive and demanding, this is how the Economic and Social Science Institute (WSI) of the Hans Böckler Foundation outlines the work of works councils. The above statement applies of course to the current and also to be elected works council committee at the Leinfelden-Echterdingen location. In view of the current economic situation and constant operational restructuring, the social management and thus the safeguarding of employment are in the foreground. A works council has to deal with tough, economic challenges. Or new work organizations, in which often no stone is left unturned (Gamma, New DSS ...). It is not uncommon for such changes to be aimed at reducing costs in order to achieve ambitious return targets (see DTAG's Excellence Program) and can lead to staff reductions. Works councils are constantly under pressure to adapt: ​​they are also occupied with restructuring when the company is doing well. Areas of action that the works councils have to deal with are: qualification, job security, changes in work organization, target agreements / employee appraisals, increased performance pressure, deterioration in the working atmosphere, overtime / overtime, working hours, individual personnel measures, occupational safety / health promotion and much more Book with seven seals The framework of the works council results from the Works Constitution Act (BetrVG) and some other laws such as the Working Hours Act, as well as collective agreements and works agreements (here the flexitime agreement is listed as a representative of many others). These are, among other things, the basics from which the operational leeway for representing the interests of employees results. The rights and obligations that the Works Constitution Act assigns to the works council under the heading of co-determination vary in scope and participation: Information and advice rights (timely and comprehensive) Right to be heard in the event of termination Rights to refuse consent (in the case of recruitment, transfers, groupings) Enforced co-determination (in matters requiring co-determination - The works council can also take the initiative) In the area of ​​so-called individual personnel measures, the works council has the right to participate with the right to veto (e.g. in the case of recruitment, categorization or termination). The works council has equal and enforceable participation in the location and distribution of working hours. Unfortunately, there are only information and advice rights, for example, in economic issues, so that the works council is often subject to the issue of friss bird or die. The employer is obliged by law to inform the works council in good time and comprehensively so that it can fulfill its tasks.As a works council walking a tightrope For works councils, it is always a tightrope walk to agree the individual interests of colleagues with the interests of the workforce as a whole and to reconcile. The subject of overtime is an example. The interests of the individual employee can sometimes be in conflict with the overall interest. Here you have to face the overall responsibility, even if the decision does not seem to be popular. Zoff and compromise By no means all company disputes are brought before the labor court; compromises are often made. It would be fatal if the impression were created that the main aim of works council work is to quarrel with the employer or to pull each other's fur over each other's ears! Works council work often doesn't work without conflicts, but without having to constantly cross blades. In many cases, an agreement can be reached at the end of a political conflict that everyone can live with .... Peace, joy, pancakes and cherry picking? The struggle for the best solution naturally also involves disputes among works councils, why not? In a democratically elected body like the works council, everything does not always have to be unanimous. But if a decision has been made, a decision has been made, then this must also be represented. It can often be observed that afterwards, when popular decisions are made, all BR colleagues are always among the winners, but sometimes necessary unpopular decisions are generally only passed on to the IGM parliamentary group! We IG Metall works councils like to take responsibility and don't believe in cherry-picking ... that's not all. My personal focal points in the local works council are work in the personnel committee, questions about categorization, advice and support for colleagues in personnel interviews, problems at work such as warnings, job references and much more ... Confidentiality and trustworthiness are a prerequisite for this and a matter of course for me.After a long day at work, it is often difficult for me to gain some distance and I take work and problems home with me. But you are sure to feel the same way, dear colleague. That is not always good and not good for your health. That is why I want to continue to work to change these circumstances for all of us in such a way that it is possible to switch off from everyday problems, even if this sometimes only seems to proceed in small steps. In the upcoming works council elections, we owe your trust to me and the list of IG Metall. E l i s a b e t h Hasel, Chair of the Personnel Committee

5 The new Mecca of CSS: Košice [pronounced: koschize] Not everyone has heard this name before. After all, it is a city with inhabitants. Košice is located in eastern Slovakia and is the second largest city in this country after Bradislava. Košice was once called Kosice and is located near the border with Poland, Ukraine and Hungary. The university town of Košice with its historical sights is located on the Hernad River and is also the economic center of Eastern Slovakia. The economic importance should be emphasized, especially due to the modern steel and rolling mill. Košice not only has a beautiful old town, but also has a tram and trolleybus line and, more importantly, an airport. The scientific state library in Košice has housed a German reading room of the Goethe Institute since 1993. Why is Košice so interesting? CSS (Computing Services & Solutions) under the leadership of Mr. Auerbach has chosen Košice as the nucleus of the foreign location, which is to support the entire growth in the ITO. There will be no more domestic staff growth for new orders. Even employees who are retiring due to old age are to be replaced by capacities in Košice in the future. The reason given for this plan is that the price pressure from the market can only be countered by a mixed calculation that includes not only the local locations but also an inexpensive location in the nearshore area. Košice was selected with the support of Košice management consultants near the border with Poland, Ukraine and Hungary in recent months. Employee representatives were not informed about the location selection process. So we don't know what criteria were used to select this location. All in all - considering that Deutsche Telekom and its subsidiaries in particular shouldn't cut jobs so lightly in the interests of social responsibility, one has to ask oneself whether it is wise to put everything on one Košice card. Incidentally, a mixed calculation that includes the salaries of trainees who have been taken on is similarly inexpensive. This also avoids the risk of an aging workforce. Dr. Klinkhammer, who stubbornly defends the 10% takeover rate among trainees, should definitely think again. Hardship of the best What are you working on? Mr. K. was asked. Mr. K. replied: I have a lot of trouble, I am preparing my next mistake. The Košice State Opera. (From: Bertolt Brecht, stories from Mr. Keuner)

6 collective agreements at T-Systems collective bargaining unit, tariff competition, tariff plurality? As at the beginning of this year in company codes 08 and 10 (and the GEI), the TSI tariff was to be introduced two and a half years ago in the former company codes 49 and 59. We have already reported several times that the works council at that time objected to the classification and application of the TSI tariffs, as we were of the opinion that a different tariff system could not be introduced solely through a unilateral decision by the employer. Because this would mean that the employer could always look for a union that suits him and conclude a company tariff according to his wishes. At that time, the employer applied to the labor court for approval of the classification, which the works council had refused, and several dozen proceedings were initiated. Some cases showed that the TSI tariffs cannot be applied due to the wording of the employment contract. In other cases it was found that the information given to the works council was incorrect and / or incomplete and that the hearing therefore had to be repeated. Most of the proceedings, however, were decided in favor of the employer with reference to an earlier decision by the Federal Labor Court (BAG). approved by the BAG with the exception of one chamber. In the meantime, however, the BAG has granted the non-admission complaint and accepted the legal complaint. This also indicates that the BAG may judge the situation differently and make a different decision. In BK 08 and 10, too, the works council objected to the classification and application of the TSI tariffs. Unlike in 2003, however, it has now been agreed that only a few sample procedures should be carried out (we have 3 procedures) and that the TSI tariffs will not be applied until the final decision, unless a new employment contract is signed or the TSI tariff is expressly requested. The first chamber meeting at the labor court for the test case is expected to take place at the end of the year or at the beginning of next year. We are by no means generally against the application of the TSI tariffs. However, we are of the opinion that this must not depend unilaterally on the will of the employer and that the IGM tariffs, in particular the ETV / DLTV, must also be applied and further developed on an equal footing. For this, the IGM must be involved in collective bargaining. The recent BAG ruling on the situation at IBM proves that two unions can be responsible at the same time. It was also clearly established that the IGM is responsible for IT services. (Dr. Dieter Neher) A complaint against the decisions of the labor court was lodged with the regional labor court (LAG). Most of the proceedings have now been decided, some of them only in the last few weeks. The suggestion of the LAG to let the proceedings rest until the BAG made a decision was rejected by the employer. The LAG brought no other decisions. However, most of the judges at the LAG are of the opinion (as at the labor court) that there is a problem of fundamental importance and that the complex of tariff unity, tariff competition, tariff plurality must be reconsidered and decided at the BAG. You therefore have the legal complaint. The IG Metall team ... not completely complete, but in good shape.

7 Salary review round 2005 After tedious detailed work (inspection of payrolls and manual recording of the data), figures on the result of the GÜP 2005 are finally available. The BR had information that there should generally be a zero round at the GÜP in many areas for employees within the scope of the DLTV. In response to our intervention, one of the head of Compensation and Benefits was sent to superiors, whereupon improvements were made in many areas. However, we cannot be satisfied with the figures now available. The TV TSI stipulates that an average of 2.7% must be paid out in the budget units (IBU s, GCC, CSS, DSS, SSM, HQ). In the regulatory agreement between the employer and works councils (BK 08 and 10) it was agreed that even those employees who did not sign the new employment contract would not be disadvantaged. This also corresponds to the case law, as was decided in a comparable case at hp / compaq, we have already reported on it. It is regrettable that the employer tries again and again to evade the law. Motto: Salary stinginess is great! The review of the GÜP results shows significant differences. There was an average percentage salary increase of 2.95% in TV TSI, 1.56% in DLTV, 2.44% in AT workers and 2.33% in sales. there were lower increases (including percentage) than for their male colleagues. Will HQ ITO SI SSM M wmwm W mw TV TSI 3.56% 3.07% 3.00% 3.02% 2.97% 2.57% 3.27% 2.20% DLTV 0.39% 0, 00% 1.45% 2.34% 1.59% 1.33% 2.78% 1.00% AT 0.00% 0.00% 3.01% 3.02% 1.60% 3.21 % 3.00% Sales 2.64% 1.84% 5.89% 1.71% 1.35% Free of tariff 1.48% 0.92% What is striking in the evaluation is that there are also 8% zero rounds in the TV TSI , so there was no increase in salary, mostly in HQ (18%) and SSM (14%), significantly less in the SI (8%) and least in the ITO with 4%. It is worrying that there were 24% clear rounds in DLTV. This raises the suspicion that either partially no GÜP rounds have been carried out, this can hopefully be made up for or, what would be worse, that these zero rounds should be used as leverage to get signatures for new employment contracts. We ask Dr. Schaaff to continue to stand by his statement that there is no disadvantage with the old employment contracts. In particular, the 28 cost centers, where there were 100% zero rounds for DLTV employees, we will Dr. Submit Schaaff with the request for clarification and improvement. Is gender used here as a criterion for the raise? Gave zero rounds? Here, too, significant improvements must be made. Incidentally, even with the zero rounds, it can be seen that there are significantly more female colleagues than female colleagues. We will request the management to make the necessary improvements immediately and to implement the non-discrimination promised in connection with the settlement agreement. If this is not done to the required extent, we reserve the right to take further steps. HQ ITO SI SSM percent percent percent percent TV TSI 3.28% 3.00% 2.86% 2.82% DLTV 0.20% 1.59% 1.54% 1.98% AT 0.00% 3, 01% 1.60% 3.17% Sales 2.64% 2.65% 1.61% Free of collective bargaining agreements 1.21% There were also modest salary increases for employees in the GEI who are not subject to a collective agreement, only an average of 1, 21%. Unfortunately, it is noticeable again that the treatment of employees over 55 years of age within the GÜP rounds is not acceptable for female employees, regardless of whether TV TSI, DLTV, AT or tariff-free. The employees at DLTV do have old-age insurance due to the collective agreements. But if the tariff salaries in the DLTV are not developed further, the old-age insurance will sometimes come to nothing. Nevertheless, many managers seem to believe that these employees automatically receive something, so that they do not have to be taken into account in the GÜP. How else can it be explained that 59% of these colleagues in the DLTV are responsible for this. Editor: IG Metall Stuttgart Responsible: Jürgen Stamm 1. Authorized editor: Uwe Meinhardt (IGM) Michael Fuchs Arne Großmann Elisabeth Hasel Dr. Dieter Neher Peter Schmid Alois Weis Printing: hartmanndruck, Wildberg

8 Hiring policy in the event of growth Interview with Kalle Schlau. Question: Kalle, how come T-Systems no longer hires employees, but other IT companies such as sd & m do? Kalle: There can be very different reasons for this, maybe it is the size of the company, maybe also the management or the goals that management is pursuing. Question: Doesn't T-Systems then aim to grow? Kalle: Yes! After all, there is the topic of Focus on Growth. Question: But nobody should be hired, right? Kalle: T-Systems has already selected a few locations where settings are still to be made, e.g. South Africa, Hungary and then above all India and now Košice, only Germany has been put in motion. Question: But isn't it true that sd & m is also hiring in Germany, or are they much bigger? Kalle: No, they are not bigger. sd & m has around 1000 employees and intends to continue to employ around 200 university graduates per year. Question: Aren't they way too expensive then? Kalle: They are definitely not that cheap, but sd & m probably has a different attitude towards its employees. After all, they have already snatched DaimlerChrysler orders from us. Question: Is it perhaps because they have to work 50 or 60 hours? Kalle: No, sd & m has a 40 hour week. But it is handled flexibly. Everyone makes sure that they fill their working hours so that family and work can be balanced through flexible working hours. And the employee also has the choice of working from home as part of the project requirements. Question: Do you then have to work a lot of overtime? Kalle: No, sd & m strives to avoid overtime and for sd & m it is a must to also think about the family behind the employees and to involve them in many activities. Question: Are there any more advantages at sd & m? Kalle: There is a lot of emphasis on personal responsibility. Vacation planning is also done independently in consultation with the team. The vacation planned for the year does not expire when the first quarter of the following year has expired. In addition, childcare is organized or offered to meet the needs of the young workforce with an average age of 35 years. Question: And the freedoms of the employees alone bring so much motivation that they also cover high personnel costs? Kalle: Sure, that makes more of a difference than most people think, but management and sales at sd & m are sure to do things differently when they are able to snatch orders from us. In doubtful cases, one decides for the right thing. (Karl Kraus)