(The following article by Grace Shim was published by the Omaha World-Herald.)
OMAHA, Neb. — Union Pacific Corp., in an attempt to cut costs, has hired a company in India to handle some information technology services.
The Omaha-based railroad company said it signed a contract last week with Satyam Infoway Ltd. of Hyderabad, India, a provider of Internet access and computer services.
Satyam is India’s fourth biggest exporter of software. It held contracts with 76 Fortune 500 companies, according to its Web site.
U.P. spokeswoman Kathryn Blackwell said the Satyam contract is not part of the company’s plan to cut administrative costs by 20 percent this year, including the elimination of jobs. Already, those cuts have led to layoffs for about 100 employees with jobs in computer services, many of them in Omaha.
Current and former Union Pacific employees say, however, that the Satyam contract has resulted in layoffs for computer-services employees.
Blackwell said the Satyam contract will permit Union Pacific to perform some functions more efficiently. She couldn’t say how much money Union Pacific would save under the contract because, she said, Satyam would handle future projects for which the fees can’t be known.
Blackwell said U.P. has hired overseas companies for more than five years, particularly in India and the Philippines and mainly for computer functions.
She said the Satyam contract doesn’t differ from Union Pacific’s past practice of hiring overseas companies.
Four people – current and laid-off U.P. employees in St. Louis and Omaha – said that is not the case. The four spoke on the condition of anonymity.
They said that unlike Union Pacific’s past dealings with outsourcing companies, the Satyam contract is for the continuing maintenance of computer systems.
The four people, all of whom worked in computer services for the company, said the Satyam outsourcing was in the “development phase.”
They said some computer functions normally done in Omaha and St. Louis will shift to India.
Two of the people, both of whom still work at Union Pacific, said department colleagues have been laid off because their jobs were to be shifted to India.
“As the systems are transitioned over, (some) people who maintained them were let go,” one employee said. “They will keep some people for emergency type fixes and to be go-betweens (for Union Pacific and Satyam).”
Two of the employees said Union Pacific had identified human resources for outsourcing first, in the first or second quarters. Car accounting, which tracks billing on the use of railcars, is to follow. Engineering is scheduled for outsourcing by December.
They said Union Pacific had budgeted money to provide severance payments to people who are laid off.
Blackwell said the outsourced work is “not what we consider high-risk work at all.
“There’s nothing that impacts our corporate security,” she said.
“All the work to date is done on a project-by-project basis,” Blackwell said. “We may have signed them up to develop XYZ, but now that we have a master agreement we can go to them with a project if we choose to or not go to them at all.”
For large American corporations, outsourcing is an increasingly common phenomenon. The reason: Lower cost.
Satyam has about 9,300 employees, and in September had offices in the United Kingdom, Japan, Singapore, Australia, the United States and the Middle East.
Srini Koppolu, director of business development in Satyam’s Santa Clara, Calif., office, said the company focuses on developing software programs, maintaining those programs and handling other routine tasks.
Koppolu said that even though the technology sector is going through difficult times, it’s also a driver for his business, especially for companies that want to cut costs and improve profits. He said the United States is bigger than Asia and Europe as a source of outsourcing business for India.