ABN Amro Narrows Down Outsourcing Field

EDS edges out competitors such as IBM global services for outsourcing contract.

Dutch banking behemoth ABN Amro Bank N.V. narrowed down its list of possible outsourcers to EDS for its Wholesale Client banking unit.

Although the two firms dont expect to complete contract negotiations until the fourth quarter, EDS is the sole contender to supply IT services, worth at least $1.5 billion, although that figure could go higher, some industry observers believe.

"I think thats what the initial size is, but they (ABN Amro) have operations all over the world. If EDS proves they perform well, it may grow," said Julie Giera, vice president and research fellow for Giga Information Group Inc. in Cambridge, Mass.

The Dutch bank intends to outsource a variety of functions to EDS. "It would cover a range of infrastructure services including IT outsourcing for mid-range devices, desktop support, local Web servers, help desk support all managed through our operations solutions line of buinesss," said John Clendening, EDS spokesman in Plano, Texas.

At the same time, ABN Amro is also looking to outsource some applications development and management to EDS.

The global agreement would involve the transfer of about 1000 ABN Amro employees over to EDS.

The win comes at a good time for EDS, which has had several quarters of declining new contracts along with other major competitors such as IBM Global Services.

With deals tending to be smaller in the uncertain economy, a major win is welcomed.

"If the deal is signed at the level the bank is estimating, it would mark our largest contract this year," said Clendening. "It would also rank among the largest agreements in IT services this year and rank as one of the largest IT services agreements in the history of the banking industry," he said.

But the deal could be eclipsed by a much larger deal, about $8 to $10 billion, expected from J.P. Morgan Chase & Co.

Although EDS will have some negotiating leverage now that competitors such as IBM Global Services are eliminated, enterprises are exacting tough concessions in todays "buyers market," believes Suresh Gunasekaran, principal analyst at Gartner Inc. in San Jose, Calif.

"Buyers are really being hard on the vendors from a pricing standpoint. Eleventh-hour negotiations are a bit more vicious right now. But vendors still have to justify their margins and numbers to Wall Street," he said.

That requirement is the reason EDS backed away earlier this summer from competing for Procter & Gamble Companys business process outsourcing project.

ABN Amro, based in Amsterdam, will release further details on the deal once it is completed.

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