OUTSOURCED JOBS RETURN TO NiSOURCE

IBM will keep providing information technology services
BY KEITH BENMAN
kbenman@nwitimes.com
219.933.3326
Date posted online: Wednesday, January 02, 2008

MERRILLVILLE || NiSource Inc. will be bringing more jobs outsourced to IBM back in-house, under an agreement inked with the computer giant in mid-December.

In a wide-ranging revision of its original $1.6 billion contract with IBM, NiSource will take back responsibility for billing and collections, payroll, human resources and other departments. Information technology work outsourced under the original contract will stay with IBM.

"With this amended agreement in place, we're on a path to more effectively manage our employee and administrative expenses, while ensuring delivery of services needed to meet the company's needs," said NiSource President and Chief Executive Officer Robert Skaggs Jr.

Union leaders welcomed the move, saying they hope it will end problems with payroll and benefits that arose in the months after the IBM agreement took effect.

"I think it's a smart move, a very good move," United Steelworkers Local 12775 President Jim Blythe said. "It really had become such a nightmare."

The original outsourcing agreement with IBM resulted in 84 NiSource management and technical employees in Northwest Indiana getting pink slips. Another 66 were to become employees of IBM.

Jobs at NiSource's NIPSCO subsidiary were affected little by the original outsourcing agreement with IBM. In part, that was because union contracts contained job-protection language.

NIPSCO is the largest utility in Indiana, with 712,000 natural gas and 445,000 electric customers. Altogether, NiSource serves 3.8 million customers in a service territory that spans nine states.

NiSource spokesman Tom Cuddy said about 20 jobs have been identified so far that will come back to NiSource under the revised IBM agreement. He said each NiSource unit will continue to assess their employment needs.

The revised agreement with IBM contains provisions giving NiSource broad access to employees it might want to hire back.

Skaggs said NiSource still expects to maintain a strong relationship with IBM, with future efforts focused on information technology.

NiSource expects to pay IBM $700 million in service fees and project costs during the next seven-and-a-half years, according to a filing with the U.S. Securities and Exchange Commission.

NiSource will make an up-front cash payment of $44 million to IBM under the revised agreement, of which $10 million will be recorded as an expense for the fourth quarter just ended. That amount already had been factored into NiSource's most recent net operating earnings guidance of approximately $1.35 per share for 2007, Cuddy said.

NiSource's stock price seems to have been little fazed by the revised agreement, with a closing price of $18.86 per share on Dec. 28, as compared to $19.12 on Dec. 12, the day of the announcement.

Two-and-a-half years ago, NiSource announced it would outsource 572 jobs to IBM and ax another 445 employees within six months. It predicted the 10-year outsourcing agreement would deliver more than $530 million operating and capital costs savings across all NiSource subsidiaries.

But problems with the outsourcing soon became apparent. Early last year, employees were told the agreement had fallen "short of expectations" and that some finance and accounting jobs would be brought back in-house.

In August, the company confirmed 100 accounting and finance jobs previously outsourced with IBM had been brought back in-house. Earlier company filings with the SEC showed that NiSource had fallen 144 jobs short of its outsourcing goal.

Some of the jobs affected by the new agreement will not come back to NiSource. Instead, the company will instead contract directly with some outsource firms that took on NiSource jobs under the IBM contract.


 

---

Copyright © 2008 nwi.com