German Giant Banks on Big Blue

Deutsche Bank, jumping aboard the outsourcing bandwagon that’s become
popular among financial
services firms, has awarded IBM a 10-year services contract worth about (US) $2.5 billion.

The arrangement calls for IBM to manage back office and business process functions across some of Deutsche Bank’s European operations in order to help the banking giant cut about $1 billion from its cost base.

Contingent on European regulators’ approval, Deutsche Bank said it would outsource its computer centers and smaller server sites in Belgium, Germany, Italy, Poland, Portugal, Switzerland, Spain and Luxembourg.

About 900 Deutsche Bank employees are also slated to switch over to IBM’s employee rolls, a customary practice in outsourcing arrangements. The switch is expected to take place in the first quarter of 2003

In addition, IBM plans to take over the operations of a new data center in Germany’s Rhine-Main region, and offer up new “on demand” computing services to Deutsche Bank — remote provisioning of computing and enterprise applications “by the drink,” as industry jargon goes.

In Deutsche Bank’s arrangement, on-demand services include integrating business processes and systems across the bank’s major divisions. In addition, IBM plans to configure hardware, software and services in an open computing environment.

As financial services firms around the globe cope with a drop in profits as a result of weak economic conditions, outsourcing contracts have been gaining currency in order to help them manage and cut costs.

EDS , for example, just signed a $4.5 billion outsourcing contract with Bank of America. The arrangement calls for EDS to establish a “one-stop-shop” of voice and data networking for BoA, among other computing services.

JP Morgan recently said it would negotiate with IBM’s on a $5 billion outsourcing deal, which would outrank IBM’s $4 billion outsourcing contract with American Express that it signed in February of this year. As banks increasingly outsource more back office operations, major IT providers are expecting financial firms that haven’t outsourced some operations to look into the possibility.