STAR-LEDGER - AT&T To Cut Thousands of Software Workers From Payroll

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Title: AT&T to Cut Thousands of Software Workers from Payroll

Story Filed: Tuesday, April 04, 2000 3:06 PM EST

Apr. 4 (The Star-Ledger/KRTBN)--AT&T is preparing to dump thousands of software programmers from its payroll, part of a stepped-up effort to get costs in line with leaner competitors.

The nation's biggest telecommunications company is negotiating separate deals with Computer Sciences Corp. and IBM to take over many of its computerized information systems, a practice known as "outsourcing."

AT&T declined to discuss the scope of the talks, but employees said as many as 3,500 software technicians in business-related units and at least several hundred on the consumer side could be affected.

In most cases, AT&T programmers would be offered identical jobs with the outside firms. They would work at the same desks they have now, in spots such as Franklin Township, Middletown and other AT&T facilities around the nation. Many would receive a modest bump in pay to sweeten the deal, but not necessarily the same package of benefits they enjoy with AT&T.

That has some software specialists seeing red. Ron Brown, a computer code-writer who has worked for AT&T for 23 years, said "paper pushers" and employees with poor records who are laid off as part of the transition will get severance pay and a shot at lifetime medical benefits. But employees valuable enough to be farmed out to CSC are only eligible for a slight pay hike to make up for lost benefits and reduced job security, he said.

"When I was hired back in 1976, the Bell system was a good, secure job, " he said. "People tell me all the time that things aren't like that today, and I agree."

Outsourcing offers several advantages for AT&T, which is in the midst of a year-long effort to cut costs by $2 billion. It can save money because it no longer has to deal with salaries, pension obligations and other overhead associated with the work. But it also benefits from partnerships with companies whose core businesses are in software development.

AT&T has 150,000 employees, including about 24,000 in New Jersey, and needs a spider's web of internal information systems to support its day-to-day operations. One example is the screenful of data that service representatives call up to make adjustments when a customer wants to correct billing errors or change account information.

But there are others to massage marketing data, send in-house messages and complete innumerable other tasks, and each needs its own computer code to keep it humming.

AT&T confirmed that it is in talks with both Segundo, Calif.-based CSC and IBM, the software giant of Armonk, N.Y., but would not elaborate. Neither would IBM or CSC.

"We do not have a finalized contract with either company," said Jon Mellor, an AT&T spokesman.

If completed, both deals would build on existing relationships. CSC took over software systems of some of AT&T's consumer telemarketing and customer support arms more than a year ago, and took on almost 300 AT&T technicians in the process.

When AT&T snapped up IBM's global communications network in late 1998, Big Blue won a 10-year contract to perform some payroll, billing and data processing functions for the phone company.

Of the two recent negotiations, CSC is closer to fruition. The software outsourcer would pick up more work and employees from AT&T consumer services. AT&T employees who would make the shift have already been notified and have until tomorrow to say if they accept the assignment; the employees would officially leave the payroll by April 29, whether they accept or not.

The IBM negotiations involve software systems for most of business services, AT&T's largest unit, as well as pieces of the systems for local and network services, according to a company e-mail sent to employees of those units on March 20.

"IBM is a leader in the outsourcing industry, and we believe our people will have good career opportunities there," Rino Bergonzi and Pete D'Amato, vice presidents in charge of the affected units, wrote in their e-mail. "We understand that has been the case with AT&T people who moved to IBM last year."

Some 2,000 AT&T employees made the switch to IBM last year, but many were angry their years of service didn't carry over for some retirement benefits. In some cases, employees said they would have to work 15 years to get lifetime medical benefits at IBM, when they needed only a few more years to qualify at AT&T.

Some middle managers who might have to make the switch this year say they're concerned the same rule will apply. A breakdown of benefits at IBM was supposed to be circulated to employees on March 29 but failed to materialize.

"I think a lot of people are pissed off with this thing," said one middle manager in business services with more than 20 years at AT&T.

AT&T has no such qualms about IBM.

"We have been pleased with their performance and their ability to

deliver measurable service level and productivity improvements at lower cost," Bergonzi and D'Amato wrote, adding that the company hoped "to make a decision as quickly as possible" about an expanded role for the software company.

By Jeff May

To see more of The Star-Ledger, or to subscribe to the newspaper, go to http://www.nj.com/news

(c) 2000, The Star-Ledger, Newark, N.J. Distributed by Knight Ridder/Tribune Business News.

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