In order to improve quality and save $850 million annually beginning in 2008, Shell Oil Co is cutting 600 to 800 information technology jobs in the United States and offshoring most of these jobs to India and Malaysia.

"It's about reducing cost and improving quality," said Anne Knisely, manager of corporate media relations for Shell Oil Co, which is based in Houston and is part of the Royal Dutch-Shell Group of Companies.

Outsourcing and India: Complete Coverage

Shell hopes to make the reductions by 2006. The job cuts will be made through attrition, reducing the number of contractors, reassigning some employees to other jobs and offering voluntary severance packages.

A spokesperson for Shell, for example, told a conference organised recently by FNV, a federation of Dutch unions, that its company's computer programmers do not work as well as those in India, and sees offshoring as a solution.

Currently, Shell has a total IT manpower of 9,300 personnel globally, including 2,200 in the United States. Most of the domestic information technology jobs are in Houston. This cutback will be mostly among temporary staff, whose work will be transferred to low-wage countries. A Dutch IT worker costs the company $85,000 annually, compared to $20,000 for an Indian.

The Royal Dutch-Shell Group of companies has reportedly signed contracts with IBM and Wipro Technologies for IT services from India. Recent reports said the outsourcing deals could be worth $1 billion or more.