ABN Amro's Big Deal
ABN Amro, a Dutch financial company, has signed a global services agreement with five IT vendors worth euro 1.8 billion, representing what industry experts say is the largest outsourcing deal to date. The agreement will cut about 3,200 full-time positions, saving the company approximately euro 258 million annually beginning in 2007, according to the company. The five vendors tapped to handle the bank's technology operations are Accenture, IBM, Infosys Technologies, Patni, and Tata Consultancy Services (TCS). IBM will provide infrastructure support services and some application development including servers, storage systems, and desktops under a five-year deal. The four other firms will provide application-development services with Infosys and TCS handling application support. The contracts represent the most money committed by a Western firm to offshore service providers under a single initiative, though a specific breakdown by vendor was not immediately available.
The services agreements come as part of a broader reorganization of ABN Amro's IT operations, according to the company, which employs 97,000 people in 3,000 branches across the world. "The agreement with selected vendors allows us to utilize the latest technology to further improve the services we offer our clients. We expect that this IT program that is shared across the group will contribute to the savings in line with earlier estimates made by the bank, while improving IT services within the group," said Hugh Scott-Barrett, CFO of ABN Amro, in a written statement.
Analysts say this deal is a sign that Indian IT firms are increasingly being invited to the table to bid on global contracts. "We're seeing less reliance on single providers and more reliance on partnering up with multiple service providers," says Dana Stiffler, research director of IT and consulting services at AMR Research. "The sophistication and services offered of these offshore providers continues to increase."
The deal also highlights another growing trend in the IT-services industry. Increasingly, multinational corporations are spreading their outsourcing contracts over multiple service suppliers rather than going with a single vendor. "You're seeing an increasing amount of willingness to work with multiple vendors. Companies are getting better at partnering," Stiffler says. "Obviously this is a massive deal. This is another example of financial services being a pioneer in outsourcing."
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