Amex defensive about offshore plans

Despite a denial by American Express Co., sources familiar with the company’s IT planning insist that it has an internally stated goal to shift a major portion of its software development to offshore locations.

The sources said that New York-based Amex plans to move as much as 70 per cent of development work offshore. That shift is an ongoing business objective, they said.

An Amex spokesman recently dismissed the 70 per cent figure and denied that the financial services company is making any fundamental shift in the amount of development work it sends offshore. But one former Amex IT worker, who said he left the company because he disagreed with the offshore policy, hotly disputed that.

“They tell (the media) one thing and tell us another. I’ve seen it. I was there,” the former employee said. “I was the guy training these (offshore-worker) greenhorns. They’re asking me to transfer my skills to someone making US$4 an hour.”

The sources were unable to say what portion of the company’s development work is currently handled offshore, and Amex declined to comment, citing a policy against disclosing such information. What’s clear is that some IT employees within Amex are disturbed by what they understand to be a major offshore shift.

“They qualify as one of the Benedict Arnold companies exporting jobs overseas that (presidential candidate) John Kerry has been talking about,” said a current Amex employee, who spoke on condition of anonymity.

According to the former Amex IT employee, most of the offshore work “is likely to go to India because they already have staff there.” However, he said that Accenture Ltd., which is in a long-term IT outsourcing deal with Amex, is subcontracting a portion of the development work to Chinese IT agencies. Computerworld (U.S.) was unable to corroborate that, however, and Accenture didn’t respond to requests for comment by press time.

According to Avivah Litan, an analyst at Gartner Inc. in Stamford, Conn., Amex is indeed looking to expand its offshore software development.

“This is the IT development and maintenance staff for their credit card stuff, including risk management, chargeback and all the applications associated with that,” Litan said. “It’s going to make everyone (in Amex’s IT department) really nervous. It’s very scary to the employees.

“The reason people at American Express are so scared to tell the IT employees that they may lose their job is those employees can wreak havoc with the systems,” Litan added.

Maintaining a mix

Tony Mitchell, a spokesman for Amex, said he couldn’t disclose any plans for IT layoffs, either short or long term. Mitchell said he wasn’t permitted to discuss details about Amex’s plans for offshore outsourcing or its contracts with vendors, but he did say that Amex isn’t shifting the amount of offshore outsourcing the company performs.

“We’ve had a fairly steady number of employees. That work gets supplemented by third-party providers. At any given point in time, there can be a shift in the mix in terms of who and where that application development work is getting done,” he said.

Amex has long used offshore services to expand its global reach and flexibility in developing new products.

“Certainly cost is a factor, but we’re not going to sacrifice service, quality and efficiency for cost,” Mitchell said. “Of course, people have different feelings and thoughts about it, but our employees know that our objective is for the company to grow overall both in the U.S. and outside the U.S., which in the end benefits not only our shareholders, but also our business and employees as well.”

Since 1994, Amex has operated its Financial Center East in New Delhi. It’s one of the company’s three major transaction-processing centres. The other two are in Phoenix and the U.K.

“Having people who are capable of doing work around the world we think gives us greater flexibility to meet our technology demands, and we also think it’s consistent with serving a global customer base,” Mitchell said.

Amex is following an offshore outsourcing trend that has emerged in the financial services sector and in other industries. Gartner predicts that by the end of this year, one in every 20 U.S. IT jobs will have moved offshore.

“All the New York banks and brokerages have been doing this. First Data Corp. has outsourced most of its development to India. They’re upgrading the entire credit-card-processing platform there,” Litan said.

A spokeswoman for First Data declined to comment on the bank’s offshore outsourcing plans.

James Beams, an analyst at Financial Insights in Framingham, Mass., said that while he hadn’t heard of any specific plans by Amex to expand its offshore outsourcing, it would not surprise him.

“It’s a megatrend. The question would be, ‘Why are they doing such a small fraction of it right now overseas?'” Beams said.

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