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IBM Banks on Deal with Dutch
By Jim Wagner

September 1, 2005

UPDATED: IBM scored a big victory for its IT outsourcing division with a five-year, $1.87 billion contract with ABN AMRO, officials said Thursday.

Big Blue will manage the international bank’s three core data centers in Amsterdam, The Netherlands, Sao Paolo, Brazil, and Chicago and lay down an on-demand infrastructure to tie the company’s network and resources together.

The contract, IBM officials said, requires regulatory and other unspecified approvals. The company has been offering management services to ABN AMRO’s offices in France and Hong Kong.

IBM will maintain ABN AMRO’s desktops, printers and PDAs, and its global help desk will provide end-user support.

As part of the deal, IBM will also establish a research center to support the development of new financial products around advanced IT services. An Evans Data report Monday found that only 19 percent of companies are outsourcing the development of new applications, down from 44 percent five years ago.

IBM officials said the contract with ABN AMRO represents the most extensive rollout to date of its Universal Management Infrastructure (UMI). The company developed the open-standards-based architecture to knit storage devices and servers on different platforms together under one common platform.

Phil Guido, IBM financial services sector general manager, said the deal with ABN AMRO is a significant win for the company as it spreads its on demand strategy, long championed by Samuel Palmisano, IBM chairman of the board and CEO, overseas.

“We’ve been on this journey within the financial services industry, globally, with our chairman’s vision of helping our clients become on demand, and we’ve been successfully evolving that strategy over the last several years,” he said. “You’re starting to see global companies embrace this and it may start in one geography and spread over time.”

The IT infrastructure and application development deal with IBM is part of ABN AMRO’s five-year, $2.24 billion IT overhaul. The company has also contracted Infosys (Quote, Chart), Tata Consultancy Services (TCS), Accenture (Quote, Chart) and Patni.

Officials at the Dutch banking concern expect to save at least $321.7 million a year, beginning in 2007, from its outsourced activities. The company expects to reduce its 5,000-strong IT department to 1,500 full-time equivalent employees as a result of the outsourcing deals; approximately 2,000 will be transferred to the IT vendors, with the bulk going to IBM, officials said.

According to IBM officials, ABN AMRO runs a mix of IBM, HP (Quote, Chart) and Sun Microsystems (Quote, Chart) servers on its global network, as well as IBM and EMC (Quote, Chart) storage devices.

Wrapped up onto one platform, IBM is then able to provide what it calls “flexible support” — a mix of grid computing services, virtualization, self-healing diagnostics and automation — to the Dutch bank.

“In the world of modern banking, technology drives customer satisfaction, as well as bottom line results,” Hugh Scott Barrett, ABN AMRO CCO and managing board member, said in a statement.

“IBM’s technology expertise, in conjunction with its knowledge of the banking industry, will underpin the value of this global IT relationship, supporting ABN AMRO in building sustainable competitive growth for the organization.”

IBM officials said they have a number of big-ticket outsourcing customers in the financial sector: Equifax (Quote, Chart), Morgan Stanley (Quote, Chart), ING (Quote, Chart), Axa (Quote, Chart), Viewpoint and Certegy (Quote, Chart).

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