Dutch Bank Sets Course with Multisourcing
Having announced late last year its intention to rethink its global IT operations, Dutch bank ABN AMRO went public with its outsourcing plans, valued at $2.24 billion over five years, earlier this month.
Rather than select a single prime contractor, ABN AMRO went with a group of five providers.
IBM Global Services, at $1.87 billion, gets the lions share of the contract value because it will handle personnel and equipment-intensive infrastructure outsourcing, including data center management, desktop and help desk needs worldwide. IBM will take over approximately 2,000 of ABN AMROs 5,000 IT workers; 1,500 workers will be let go; and 1,800 will remain to handle strategic and management tasks. IGS will begin by managing ABN AMRO data centers but may later consolidate those operations into its own facilities in an on-demand computing arrangement under which it will charge only for the resources used.
Although a large financial institution handing over operations to IBM isnt earthshaking news, more interesting is the application support and development component of the deal, won by three Indian "tigers," Tata Consultancy Services, Infosys and Patni Computer Systems, along with Accenture, of New York.
TCS will call on its development centers in India, Brazil and Hungary to develop apps for $247 million, an amount TCS claims is the largest ever won by an Indian services firm. TCS will support and enhance applications for ABN operations in the Netherlands and Brazil and for the banks private-client business.
Infosys share of the application development pie is $125 million and covers application maintenance for the banks consumer and commercial business unit in North America, asset management in the Netherlands, and new growth markets in the Middle East and Asia.
Patni and Accenture were awarded preferred-vendor status, with the right to bid on application development work.
The choice of Indian firms shows theyre faring quite nicely against the other outsourcing powers around the world when it comes to application development. And theyre not subcontractors to IBM, so the deals fit into the category of multisourcing. The deals also meet the criteria of vendor consolidation, in that ABN AMRO had a larger number of application development partners previously and is consolidating its number down to the winners of these contracts.
For ABN AMRO, the numbers added up. "From 2007 on, we expect well save more than 258 million euros [$322 million] per annum," said Tom de Swaan, ABN AMROs chief financial officer, in a conference call. With an annual IT budget now at 2.5 billion euro ($3.12 billion), the deals will save the bank approximately 10 percent over what it is now spending, de Swaan noted.
Beyond that, there are not many specifics. Although IBM said it will build a new "innovation center" to develop "highly advanced IT services to support new financial products," IGS General Manager for Financial Services Phil Guido declined to elaborate, beyond ATMs, on what technologies will be explored.
While TCS and Infosys seem to have finite pieces of the application development puzzle, just what Accenture and Patni will be doing is yet to be determined. To make multisourcing work, cooperation between the different providers is critical. With many things apparently yet to be decided for ABN AMRO, it seems clear that the providers will have to rise to new levels of cooperation.
With the largest percentage of the contract, IBMs role will be special, said Guido. "The bank has asked us to play a guardian role to facilitate end-to-end value for the client," although "well all work together for the best of ABN AMRO."
Out and about
Computer Sciences Corp. got the nod for a contract to support the U.S. Air Force Air Education Training Command with maintenance and operation services for the 81st Training Wing at Keesler Air Force Base in Mississippi. With one base year and in one-year options, the value of the contract could reach $307 million.
CSC will handle facilities operation and maintenance; receiving; inventorying and distribution of supplies; fuels management, weather forecasting and reporting; housing; and personnel management. Keesler has 4,700 students.
Stan Gibsons e-mail address is email@example.com.
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