How AECOM's $2.3bn outsourcing deal with IBM went disastrously wrong
Computing charts the recent history of the ailing deal, with rumours building that the companies are on the cusp of acrimoniously parting company
Engineering giant AECOM announced its decision in January 2017 to outsource the vast majority of its IT personnel to IBM in a $2.3bn deal. The strategy involved a large number of redundancies in IT, with many staff being offered the opportunity to transfer to IBM to work on the contract.
However, the move was soon plagued by a variety of issues, largely involving broken processes, overloaded teams, and extremely low morale among staff.
In many ways it presents a blueprint for how not to manage a major outsourcing deal. Here is our timeline of everything that happened, from the date of the announcement, to the present day.
27 Jan 2017
Computing first caught wind of the news from a post on layoff.com, a site which encourages employees to post about job losses. The post suggested that morale amongst technology staff at the firm had plummeted, with one user 'unwanted employee', predicting that any offer of alternative roles at the firm will not be attractive.
Whilst no public announcement was made by either AECOM or IBM, Computing heard that staff received letters in mid-January informing that of the decision, but were told what would happen to their roles.
"They Outsourced the IT Department to IBM for 4 months and then what? We get an offer of a job 100 miles away and if we don't accept we are Terminated without any sevrans [sic] pay for years of
User 'shafted123' complained that IT staff only learnt about the move at the same time as the rest of the company.
"So you were right. AECOM IT is being outsourced to IBM. 950 dedicated staff who have worked their butts off for this terrible company are now at risk. Maybe 30-40% will get jobs with AECOM or IBM, if they are unlucky enough to have to take them!
"It was announced to the whole company by email before anyone in IT had been informed, that's just charming!
"Worked for this horrible company for a long time in its various guises, can't wait to take the payoff and escape!!!"
User 'onewhoknows' pinned the blame squarely on Peck himself.
"IBM is forcing relocation and is expected to layoff people not retain then. AECOM cio Tom Peck is to blame for this. Not Vance or anyone else. He drove IT into the ground. And misused millions of dollars."
This initial story prompted the first of many inside sources at AECOM to contact Computing anonymously, giving their side of the story. Just a few days after publication, we heard about the true scale of the redundancies.
30 Jan 2017
A new inside source claimed that only 50 jobs were to be retained at AECOM, with the bulk of the remainder of the almost 1,000 IT staff likely to be made redundant.
"On January 10th, AECOM's CIO Tom Peck held a Town Hall meeting with our Global IT Team to announce that they're outsourcing AECOM's IT to IBM, per a deal signed on December 31st, 2016," wrote the source.
"During his presentation, a visibly nervous and flustered Tom Peck explained that of the c1,000 IT jobs at AECOM, a scant 50 jobs, nearly all management, will be retained.
"Around 230 jobs will be transitioned to IBM on February 1st, with the possibility of being hired by IBM after June 2017. The rest will be laid off, the US workers first with Canada, UK, and Asia unknown, hopefully with severance pay," the source added.
And the inside sources continued coming forward, with another claiming that the redundancies were having an impact on customer projects.
1 Feb 2017
There are delays in major IT projects at Aecom following the announcement that the entire department will be outsourced to IBM, an inside source claimed.
The source, who didn't want to be named, stated that two large projects are currently being delayed, whilst smaller programmes are rushed through before staff are lost.
Having grown largely via acquisition, including the purchase of rival firm URS in 2014 for $6 billion, AECOM still operates a large number of domains, and their migration programme was one of the works allegedly being delayed.
"AECOM's umbrella has over 50 domains from other companies that we've been working on migrating into a single domain," stated the source, claiming that this work is being delayed, in addition to another project to upgrade all Microsoft Office installations to the latest version.
At the same time, some smaller unified communications projects were allegedly been rushed through.
"They actually sped up the timeline of a conversion from Lync/Skype to Cisco Jabber so that it was rolled out enterprise-wide just a few days before the layoffs were announced," said the source.
Next: 2018 - The deal is "a mess" and the CIO never wanted it
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How AECOM's $2.3bn outsourcing deal with IBM went disastrously wrong
Computing charts the recent history of the ailing deal, with rumours building that the companies are on the cusp of acrimoniously parting company
Two weeks later, and more sources had come forward, with the deal already collapsing into chaos, according to insiders. One claimed, accurately as it transpired, that CIO Tom Peck would be leaving shortly.
19 Feb 2018
IBM's $2.3bn gloal outsourcing contract with engineering giant Aecom is "a mess", and CIO Tom Peck is "on his way out", according to a source close to the deal.
The source explained that they had seen a request to terminate all of Peck's accounts from the financial systems, and suggested that this means the CIO is leaving.
The source argued that it the decision to leave may not be Peck's: "I think it wasn't him deciding to leave," they suggested.
They claimed that the deal has resulted in a greatly reduced service from IT, compared to its previous capabilities when it was run internally by Aecom.
"It's surprising for a company like IBM that the support they provide is terrible," they said.
"Lots of people have complained about the service they're getting from IT. It now takes weeks to clear new accounts. It's just not working and it's gone so badly that some departments are asking to charge IT for their employees' time because people are sitting there not being able to work."
Another source described the relationship between AECOM and IBM as a ‘sinking ship'.
21 Feb 2018
A new source added that Tom Peck's desire to outsource the entire IT estate had been obvious since 2014.
"Especially in IT, we could see right away Tom Peck's desire to outsource all or segments of IT, starting with service delivery or helpdesk. He immediately hired CompuCom (based in Mexico) to replace many long time very skilled IT helpdesk personnel.
"This is important, because working in the engineering industry, as IT, takes technicians with a very special skillset to be able to understand, in depth, a variety (thousands) of design-related software, and have a unique relation with their local offices. This does not work when outsourced to foreign support groups, especially script-reading call centres."
The source alleged that those former Aecom staff left are given little chance to succeed.
"The remaining 're-badged' employees are constantly being set-up to fail, we stand alone on the contract with IBM management and Aecom management providing no guidance, no assistance and no roadmap. The rebadged employees have done an amazing job considering the challenges, but we are fewer by the day.
"The ship currently taking on water will soon sink to the ocean floor if nothing is done. After seeing the way IBM operates, it will never be the answer for Aecom, this environment is much too unique and difficult for cheap labour. Highly skilled IT staff will be the only way to success."
And still new sources continued to pour forward, as Computing became known as the place to come to learn what's really happening with this deal.
23 Feb 2018
Two new inside sources contacted Computing to claim that the outsourcing deal was not CIO Tom Peck's idea.
"Tom did not want it," claimed one source. "The outsourcing never was what Tom wanted."
They alleged that the deal was made as a cost saving exercise.
"The choice was financial not strategic. From my understanding it was the COO (who was let go) who said we would outsource. Aecom and URS [a construction firm acquired by Aecom in October 2014] grew through acquisitions for decades, and IT redundancies were never dealt with."
The source added that some viewed the resulting combined IT departments as overstaffed.
"When efficiency experts came in our IT was way too high for a company of our size, and instead of doing the tough job they outsourced."
The source also alleged that the IBM deal will not last for more than a few years.
"My opinion is that IBM will be out within a few years. The experience has been miserable."
Computing then learned that from another source that the deal's architect was AECOM COO and President Steve Kadenacy.
1 March 2018
A new inside source has told Computing that Aecom COO and President Steve Kadenacy was behind the controversial deal to outsource IT to IBM.
The source, who didn't want to be named, corroborated what previous sources have stated, that CIO Tom Peck was forced to implement the outsourcing strategy, against his wishes.
"The entire IT outsourcing idea was forced on Peck by Steve Kadenacy, who was ousted last year in a fallout with [chairman and CEO] Mike Burke and [Innovation and M&A Lead] Jeff Stein."
Kedanacy earned just under $12 million in his final year with Aecom, according to salary.com.
The source went on to state that construction and engineering giant Aecom has struggled in recent years to meet profit expectations, "mainly driven by the fact that they have not been able to deliver a profit in the US and Canada for years".
The source added that the firm decided to cut costs, which was the main driver behind the outsourcing deal.
Next: The CIO quits, and sources allege that the deal could be about to be cancelled
Delta is a new market intelligence service from Computing to help CIOs and other IT decision makers make smarter purchasing decisions - decisions informed by the knowledge and experience of other CIOs and IT decision makers.
Delta is free from vendor sponsorship or influence of any kind, and is guided by a steering committee of well-known CIOs, such as Charles Ewen, Christina Scott, Steve Capper and Laura Meyer.
Ten crucial technology areas are already covered at launch, with more data appearing and more areas being covered every week. Sign-up here for your free trial of the Computing Delta website.
How AECOM's $2.3bn outsourcing deal with IBM went disastrously wrong
Computing charts the recent history of the ailing deal, with rumours building that the companies are on the cusp of acrimoniously parting company
Perhaps unsurprisingly, Peck was soon to resign.
6 March 2018
AECOM CIO Tom Peck has resigned to become chief information and digital officer at PC reseller and distributor Ingram Micro - a move that comes after a series of leaks from inside Aecom indicating that its $2.3 billion outsourcing of its IT department to IBM is not going as smoothly as anticipated.
Peck's last day at Aecom was on 1 March and he joined PC reseller Ingram Micro this week and will replace Ramesh Nair, Ingram's outgoing chief information officer.
Almost immediately, further news surfaced about the worsening relationship between AECOM and IBM.
8 March 2018
A new inside source at construction giant Aecom has claimed that the relationship with IBM is souring and that the ill feeling now extends all the way up to the CEO.
"The IBM relationship has been absolutely horrible," the source told Computing. "I think there's a lot of upset people, and that goes all the way up to the CEO. Even at that high level, they're not happy," they added.
The source added that the deal with IBM is unlikely to last.
"My guess is it won't stay with IBM as people are too unhappy."
The new source corroborated what others have claimed. They stated that the deal was financially, as opposed to strategically motivated and that CIO Tom Peck tried to resist it.
"Tom Peck is no saint. But he didn't want the outsourcing at all because it [would] put him out of a job. They took all the people who worked for him and moved them over to IBM, and that made his job obsolete. Tom likes leadership and power so he didn't like that."
The source claimed that there are now a host of broken processes within IT, and that if IBM is aware of the problems, it is doing little or nothing to repair the situation.
"We see broken processes on a daily basis. We see things like tickets persistently being assigned to the wrong teams. You try pushing back and explain that the ticket doesn't belong here, but there's no process for that so it comes right back again.
"That happens 20 times in a row and no-one fixes it. IBM's left and right hands are completely ignorant of one another. It creates a lot of frustration and you spend time doing things that shouldn't have to be done."
Then, earlier this year, a new source came forward to claim that the deal would soon be cancelled.
7 Jan 2019
IBM will "be gone by Spring" from its $2.3bn outsourcing contract with engineering and construction firm AECOM, according to an inside source close to the deal.
The new source comes in the wake of many others, who have contacted Computing to describe a catalogue of failures and worsening morale.
"As of today I am being told IBM will be gone from AECOM by spring," the source said. "IBM continues to lose money every month due to not meeting contract needs," they added.
The insider, who until recently worked at AECOM in IT, said that they left after IBM brought in new staff who had been working on a different contract, most of whom had little IT experience, they claimed.
"This was an epic failure as most were clueless, and many left due to not knowing how to do their job. I still speak with many engineers who claim IT support has gotten much worse. No one knows how to fix anything," they added.
That brings us up to the present date. Have you been close to this deal? If so, drop us a line at [email protected] - your anonymity will be preserved.
Delta is a new market intelligence service from Computing to help CIOs and other IT decision makers make smarter purchasing decisions - decisions informed by the knowledge and experience of other CIOs and IT decision makers.
Delta is free from vendor sponsorship or influence of any kind, and is guided by a steering committee of well-known CIOs, such as Charles Ewen, Christina Scott, Steve Capper and Laura Meyer.
Ten crucial technology areas are already covered at launch, with more data appearing and more areas being covered every week. Sign-up here for your free trial of the Computing Delta website.