Posts Tagged ‘Westpac’

Westpac offshores 119 systems maintenance jobs

March 6th, 2012

Westpac has flagged plans to cut a further 119 IT jobs from local operations in the latest round of outsourcing to the bank’s technology partners.

Staff at the company’s offices in NSW, Queensland, South Australia and Victoria were told of the cuts last week.

The cuts would generally impact systems maintenance roles and would be outsourced to vendors specified under the bank’s 20-month Applications Services Transformation program, first unveiled in November.

It is understood IBM is one outsource partner for the bank but a Westpac spokesman would not confirm which partners the jobs would be outsourced to.

“We want to retain our core high-skilled technology workforce in Australia but some IT roles can be more efficiently provided by external specialists,” the spokesman said.

The job cuts comes as the latest round of IT transformation at the company, which included the introduction of a new multi-sourcing initiative and significant changes to IT executive roles at the bank.

Outsourcing costs accounted for $592 million in expenses during the 2011 financial year for Westpac.

“Westpac has a responsibility to invest in jobs and skills in Australia, and they can afford to do just that,” said Leon Carter, Financial Service Union national secretary.

“Instead, what we see is this ‘race to the bottom’ mentality with one goal – to boost their massive profits even higher at the expense of loyal, skilled Australian workers.”

Source:http://www.itnews.com.au/News/292688,westpac-offshores-119-systems-maintenance-jobs.aspx

The Westpac dialectic: IT outsourcing and warring narratives

November 15th, 2011

If you were a guardsman patrolling Westpac’s chrome and steel fortress in downtown Sydney as the company held its annual results briefing session several weeks ago, it would probably have been inevitable at some point that you would have recognised that something had gone rotten in good Queen Kelly’s normally prosperous realm.

On the face of it (as all great enterprises constantly strive to assure the public) everything was going swimmingly. The bank had announced record profits — up 10 percent to almost seven billion dollars — for the past year, and the future was looking swell. The annexure of luscious tier two target St George? Complete. Deeper relationships with loyal customers? Growing. Productivity savings kicking in? Nice.

Tick, tick, tick. As with all annual results sessions, you got the feeling that Westpac was heading for an explosive finale. Boom! We conquer the world. Make all of our shareholders millionaires. Buy CommBank. Whatever. Something larger than life. Something to inspire us all.

But as the day — and the week following it — wore on, it became increasingly clear that a thread of unease had made its way into Westpac’s golden future. A hint of that horrible concept which every major Australian corporation constantly dreads being associated with. Something rotten in the back of the fridge. As Gail Kelly smiled, nodded and accepted the plaudits of analysts graciously, whispers were beginning to circulate that the bank was planning a large round of job cuts in its technology operation.

To have this scenario associated with a record annual results session is the definition of a no-no, as viewed by any company’s board. Instantly, your successes turn into failures, as the redundancies become the story. A layoffs angle associated with a record profit session is every journalists’ dream and every chief executive’s nightmare. It allows the press to feel good about itself and get on its high horse — exposing corporate greed, putting the manacles on power and portraying smiling, well-dressed executives as Machiavellian manipulators. It allows unions to do the same, and forces the public into believing the worst of Australia’s corporate giants. In short, it’s top stuff. Not exactly the image that Westpac wants to be associated with.

And so, in its own moment of crisis several weeks ago, Westpac bank tried to spin its way out of its little mess.

Applying tried and tested techniques imported from Westpac’s marketing department, Kelly re-branded the offshoring of jobs as “best-sourcing” of the bank’s technology resources. Redundancies aren’t redundancies in 2011. What they are is bringing “rigour, discipline and cost efficiency”. They’re “more efficient workforce management”, ‘leveraging partners’, suppliers managing functions on “an outcomes basis”, “scalability”, “flexibility”, “a step change” in supporting the bank’s applications, and more.

The changes would involve “systematically identifying and engaging the most skills and cost efficient resources to identify functions or processes, whether they work through us directly or indirectly through one of our local or off-shore supplier partnerships”, iTNews quoted Kelly as saying.

“In other words, we specify what we’re looking for from that function, the processes are clearly documented, they bring their resources, expertise and people to it and we get the flexibility and get the best practice that they can bring to us,” she added later, according to The AustralianIT. “It’s a new model, it gives us scalability, it gives us flexibility.”

And Australia’s technology press ate it up wholesale. Headlines like “Westpac details multi-sourcing plans”, “Westpac CEO Gail Kelly spruiks ‘best sourcing plans’” and even “Westpac trusts contractors with more work” exploded across the web, as the bank’s new IT strategy found its footing and took on a life of its own.

If you believed the hype, a newer, more complex form of banking was emerging. One which would take us all forward into a glorious future, leveraging the right “resources” and improving productivity and effectiveness. As Westpac’s results briefing calmed down, this became the dominant narrative externally to the bank. There were no outraged staff members. No journalists asking pesky questions. No — God forbid — political interference. I’m sure the executive team down at Westpac Place was satisfied. All was well in Kelly’s kingdom. Calm and quiet — just the way CEOs like it.

Pedal hits the metal
But inside the bank, unfortunately, all was not well.

Just days after Kelly announced Westpac’s new ‘best sourcing’ IT strategy on Thursday November 3rd, the bank’s employees began to feel nervous. What, after all, did ‘best sourcing’ mean? Some articles on Westpac’s announcements — this one by iTNews being the most notable and detailed — had contained disturbing implications. Did Westpac expect “staff cuts”, as the publication reported? Was it true that possible suppliers included Indian outsourcing giants Tata, Infosys and Wipro, as well as IBM (which also has a substantial facility in India)? Sure, most of these names were already strongly associated with Westpac. What did “best sourcing” truly mean?

The answer was to come swiftly.

“Westpac is outsourcing all development functions over the next 20 months,” one industry source told me early the next week, as the rumours caught fire. “Affects maybe 2,000 jobs under the Software Delivery Applications area.”

The whispers continued to come thick and fast. Firstly, the announcement was to come from Kelly herself. Then, things shifted and it was to come from highly regarded Westpac chief information officer Bob McKinnon. The figure shifted as well. First, 2,000 staff were to be under review, as that was the total amount of staff in the Software Development Applications area. Then things moved — the outsourcing was to affect just some 1,200 staff who did development and testing work. Now, the rumour mill has focused on compulsory leave over Christmas for some staff.

As is turns out, Westpac did make an announcement on the day the rumours suggested. The bank confirmed in a statement last week that it opened consultation with staff on the matter on November 8 — a Tuesday. Five days after its annual results announcement the previous week. Five days in which rumours flooded around Westpac and the remainder of the banking sector like wildfire.

And indeed, although the bank said it doesn’t know how many staff were to be affected by the cuts, the 1,200 number keeps on floating around.

“As you know, we are currently at historically high levels of employment and have bought in an additional 1,200 contractors in the past year and a half to work specifically on application services work,” the bank’s spokesperson said last week. “As we are currently undergoing consultation and then transition we are not yet in a position to confirm future staffing levels and the breakdown between permanent staff and contractors.”

After the announcement, the situation only got worse for Westpac, as panicked internal staff called their union representatives in for help. That same Tuesday, the Financial Services Union wasted no time in issuing an inflammatory statement on the matter, including all the keywords to get journalists fired up. “Westpac announces first job cuts after making record $7 billion profit,” the union’s headline screamed. “The job cuts, mainly in Sydney and Adelaide, will mean that a number of IT functions will no longer be handled by Westpac, and will instead be provided by outside companies both in Australia and offshore.”

Boom. There’s a hot story right there. And as they had the week before, the headlines flowed in. But this time, Westpac wouldn’t have been too happy with them. “Best sourcing” was out. “Outsourcing to India” and “cutting Australian jobs” was in. “Union fires up over Westpac outsourcing,” wrote ZDNet. “Westpac to shed jobs as cost cutting bites,” was how the Sydney morning Herald labelled it. And iTNews was more blatant: “Westpac cuts 188 tech jobs”. Even Delimiter itself got into the act, with “Outsourcing to affect 188 Westpac jobs”.

Despite the bad press, the headlines didn’t appear to phase Westpac. The bank issued a cool statement noting it had announced to staff that it was “changing the way we outsourced some roles” and that the 188 jobs referred to “an initial consultation process”, but that it would “minimise the overall impact on our technology workforce”. Above all, Westpac emphasised it couldn’t be sure how many Australian jobs could eventually be affected. “The final impact on our full-time staff will not be known for a number of months as we work through the transition,” the bank said.

But despite Westpac’s best intentions, these comments sent a number of readers hopping mad.

Delimiter subsequently received a throng of anonymous tips alleging that the bank — as the union had already stated — had been outsourcing “for well over 18 months already”, was already using Indians in bulk for onshore jobs under 457 Visa, was handing over intellectual property to companies like Infosys and Tata, and was even keeping some Australian jobs just until they could ensure the Indians were reliable.

And there appeared to be some truth to some of the comments.

Westpac’s spokesperson confirmed it was already using a combination of permanent staff, local contractors, specialist organisations and its “existing offshore suppliers” to support its application development and maintenance needs. They confirmed the bank was looking at how that mix might change, as the bank’s business requirements changed. And they also confirmed comments that the bank had recently been integrating its BT and institutional bank technology workforce into its main technology division.

Do I think Westpac is looking to outsource 2,000, or even 1,200 staff? Do I think it’s not protecting its intellectual property? Do I think it had shoddy employment practices? No — there’s not much evidence that things are that bad, although I’m sure there are elements of these issues floating around, as there are at most companies. But some people do believe these things. And some of those people are the bank’s own staff members.

The wash
Now, what I don’t want to do with this article is give readers the idea that there is anything wrong with Westpac’s strategy of outsourcing jobs to Indian IT firms.

Frankly, and I can’t stress this highly enough, the Australian business community is currently extremely reliant on offshoring initiatives for one simple reason: It is completely impossible to source the amount of skilled labour which major companies like Westpac require purely through on-shore labour — and certainly not at any price level which would be considered reasonable. I’ve heard this story time and time again from Australian executives — enough times that I believe it to be true.

Secondly, it is also true that if you are one of the Westpac staff affected by the move, it is highly likely that your experience in Australia’s banking sector will enable you to find a new job — or, more likely a new, well-paid contract — pretty quickly. Good IT skills are in short supply in Australia right now, and the banking technology world is a small one. If you’ve got a few connections, you’ll probably pull through OK.

The angered emails I’ve received over the past several weeks on the matter, the heavy-handed union claims on the issue and the level of angst out there about Westpac’s actions … are pretty much overblown. Calm down, people. Westpac is enacting a legitimate business strategy here. It’s not the end of the world. ANZ has had a whole in-house IT facility in Bangalore for years. Offshoring is speedily becoming the norm — not the outrage which the unions would have us believe.

However, what is also true is that Westpac has enacted this strategy in a coldly manipulative way which I, and I’m sure many of its staff and contractors, find fairly offensive and a little Orwellian. It has attempted to rigorously control the way it communicates its job cuts, both externally and internally, in a way that will lead it to the greatest advantage — but in a way that has required it to obfuscate and hide the truth deceptively.

The bank’s marketing-esque ‘best sourcing’ language used at its annual results session was a blatant attempt to cloak its IT offshoring initiatives in a golden varnish of shiny corporate-speak. Take this example of nonsense doubletalk.

What exactly does this mean? To most Australians, it will mean just one thing: Absolutely nothing. To a certain variety of corporate yes-man, it will mean: “We’re doing something, but we don’t want to put it in words which actually mean anything”. And to Westpac’s panicked staff, right now it means: “Get off the sinking ship before you’re forcibly jettisoned.”

I also don’t really believe Westpac when it says it has no idea how many staff will eventually go. These things don’t happen overnight — if the bank is confident enough to begin discussing the matter publicly, it has to have been in closed door discussions with the outsourcers for months — perhaps many months. In my experience, McKinnon and the other Westpac technology brass have always had a very, very concrete and solid idea of how they want the bank’s IT strategy to go forward.

Despite this, however, the bank last week chose to tell staff and union members that just 188 jobs were at risk in the short term. This action represents something fairly cold — a calculation that the bank can get away with more cuts than it would otherwise, if it sugar-coats them and extends them into a lengthy series of small job loss packages over time rather than a lot hit on the head in one fell swoop.

The difference between the narratives generated by Westpac and the Financial Services Union is that Westpac was easily able to predict what the union would do, confronted with any job cuts at all. So, in a calculated fashion, it limited its losses. Instead of fighting one major battle, it chose to fight the union — which represents its own employees — in a guerrilla war of attrition. It will cut down resistance to the job cuts one step at a time, one small division at a time, until it reaches the level it wants to. It’s a proactive strategy which will ultimately defeat the more reaction union, as it is designed to do. In comparison, the union is reacting entirely as predicted. Outrage, outrage, burn and outrage. It’s what unions do best. Westpac knows this.

The interesting thing about the first (at its annual results) and second wave (the union’s statement the next week) of reports about Westpac’s IT outsourcing efforts over the past several weeks is that they actually contain almost the exact same information. But the information was framed differently. One man’s “best sourcing” and “more efficient workforce management” is another man’s “188 jobs offshored”. One man’s ‘valued partners’ becomes another man’s Indian offshoring initiative.

From my perspective as an onlooker, it’s like watching a vast smothering blanket being draped over Australia’s banking technology coversation. Right now, with respect to its staff internally, onlookers externally and third-party stakeholders like its unions, Westpac is not being clear. It might be taking the right business strategic approach — in fact, knowing its CIO, Bob McKinnon, I’m sure that it is. But the way it is communicating that change reminds one of a vast, multi-headed bureaucracy stifling all dissent.

From this angle, it’s not hard to see why unions and other employee groups get so frustrated with corporations like Westpac. In a vain attempt to find out what’s happening with the bank’s workforce, they are confronted with waves of corporate jargon. Journalists are pre-brainwashed so that repetitive small rounds of cuts can be made later without fanfare. And staff members only find out about things after everyone else … including, most likely, many staff from the vendors who will help replace them.

One of the most extraordinary things about this whole process is that previously, I had considered Westpac one of the most open of Australia’s banks. I’ve sat down over lunch with its CIO Bob McKinnon and other senior executives. I’ve quizzed the bank many times on individual news stories — such as its shift to Microsoft Exchange — and gotten fairly normal responses. But after what we’ve seen from Westpac over the past few weeks, I’m disinclined to continue to trust it as I have been.

As a technology journalist, I’ve always been willing to accept a certain amount of conceptualised thinking. When you’re at a 30,000-foot view as a CEO or CIO, overseeing thousands of staff at a major organisation, those staff necessarily become ‘resources’ rather than people. Trends, cycles, variances. All of these things become more important than individuals when they’re writ large over such a huge canvas.

But there is a difference between that kind of conceptual thinking and the kind of cold manipulation which Westpac has carried out over the past few weeks. “Best sourcing” is not an acceptable metaphor for reviewing thousands of people’s jobs. “More efficient workforce management” should not be used as a catchphrase for a process which will influence the future careers of staff members who have worked passionately for your business’s advantage.

At a certain point, corporate-speak becomes more than an abstraction. It becomes more than a useful metaphor. It becomes something which is simply undesirable in the honest relationship between an employer and and an employee. It becomes something which is all-too pervasive in our media-saturated society. It becomes something which we must make war against, and attempt to outlaw. It becomes nothing more than that most odious of things: Spin.

Source:http://delimiter.com.au/2011/11/14/the-westpac-dialectic-it-outsourcing-and-warring-narratives/

Union fires up over Westpac outsourcing

November 9th, 2011

At the bank’s recent annual results announcement, Westpac Group CEO Gail Kelly announced that the bank would outsource some technology roles in a push known as “best sourcing”.

Westpac confirmed to ZDNet Australia today that the initial phase of the best sourcing program will see 188 jobs outsourced from the bank’s Enterprise Testing Services division.

Westpac is currently conducting a review into its local operations to determine how many roles could be outsourced under the new program. As a result, the bank won’t comment on how many jobs will go.

The bank told ZDNet Australia that it won’t force the outsourcing program onto staff, and will instead focus on “natural attrition” and the redeployment of affected employees to other parts of the business. Westpac added that it will look to minimise the use of temporary and contract staff in the business.

Despite Westpac’s assurances that the outsourcing process will be as humane as possible, the Financial Services Union is still fired up over the campaign.

The FSU national secretary Leon Carter said that Westpac have tried and failed IT outsourcing programs like best sourcing before.

“Westpac previously outsourced Adelaide-based technology jobs to HP but has bought the jobs and functions back in-house because in the long run that decision didn’t actually reduce the bank’s costs,” Carter said in a statement today.

Carter added that no Australian bank can justify cutting jobs after their record profits were announced last week.

“With a combined profit of more than $24 billion this year, if anyone can afford to invest in Australian finance jobs it is our four big banks, particularly the most profitable bank, Westpac.

“For any major bank to slash jobs at the moment is a complete abrogation of the banking sector’s responsibility to the community that they profit from. Those profits should be devoted to developing skills and investing in jobs here in Australia,” he said.

Carter promised to continue the union’s campaign against IT outsourcing in Australia.

Source:http://www.zdnet.com.au/union-fires-up-over-westpac-outsourcing-339325819.htm

Westpac New Zealand and IBM Sign Five Year Services Deal

October 17th, 2011

IBM IBM +1.99% today announced that Westpac New Zealand has renewed its strategic information technology (IT) outsourcing agreement for a further five years to 2017. Under the new contract, which expands on an agreement first signed in 2000, IBM will deploy new technologies to improve customer service and sustainability, and upgrade existing systems.

IBM has prime responsibility for Westpac’s key IT infrastructure services, including mainframes and midrange systems, storage, security, data center raised floor services, data center network services, workplace services, and workplace printing.

Under the new agreement, IBM will provide a range of advanced technologies which, together with the existing environment, will create additional synergies, flexibility and choice for users. New IBM z196 mainframes will provide greater resilience and increased capacity to support Westpac’s continued growth while virtualized midrange servers and storage solutions will reduce CPU power demands and overall data center footprint. In addition, enhanced security and data center network technology will continue to ensure a highly secure and resilient network. The deployment of the IBM technology will support the low risk transformation to new data center facilities.

The new IBM agreement represents a solution that underpins the Westpac NZ IT strategy providing a robust and resilient platform for the future, including an upgrade of the underlying IT Infrastructure. It provides the upgrade path for Westpac’s workplace environment, ensuring the latest technology is deployed and there is a migration path to the latest operating systems. New automation tools for provisioning and managing the overall IT environment will be implemented, improving the time to market for new IT solutions in the Bank as well as ensuring the systems remain stable and secure.

The agreement, signed in September 2011, supports the Bank’s technology transformation program and will deliver greater consistency across Westpac NZ vendors and the Westpac Group.

“Westpac is pleased to renew what has proved to be a successful and constructive long term relationship. It supports the Bank’s strategy of making it easier and faster and providing an experience that delights our customers,” said Jim Stabback, General Manager Customer& Technology Services, Westpac.

“The new agreement builds on our mutual experience since 2000 and will lead to an even closer alignment of IT services with the needs of Westpac’s employees and customers as our collective team works together to deliver on the bank’s IT vision,” said Andrew Fox, General Manager, Global Technical Services, IBM New Zealand. “The ongoing investment by Westpac in advanced technologies will positively differentiate its brand in many ways such as higher energy savings and improved customer service.”

Today’s announcement with Westpac is another example of how IBM Global Services teams with its clients to solve business problems and help them capitalize on new opportunities. Clients today are looking to IT service providers for more than just cost cutting. Global clients need help finding ways to better leverage IT into their business to stimulate growth and prepare for the future. By tightly weaving together business insights, an industry-leading software portfolio, world-class technology research and operations expertise, IBM is redefining what it means to design, deploy and deliver IT services on a global scale. As a result, IBM Global Services clients achieve faster return on investment while freeing up resources to focus on innovative projects.

Source:http://www.marketwatch.com/story/westpac-new-zealand-and-ibm-sign-five-year-services-deal-2011-10-14

Westpac hires soft skills for shorter outsourcing deals

July 29th, 2011

Commerce, legal and finance experts to assess and ‘sweat’ contracts.

Westpac has established an in-house team of commerce, legal and finance experts to support its move toward shorter deals with a greater number of outsourcers.

During the past nine months, the bank established a commercial pricing team to take on contract negotiation tasks that were previously handled by external consultants.

Westpac’s general manager of commercial and technology Elizabeth Henderson told a vendor management panel discussion yesterday that it strived to develop “soft skills” within the team.

“Back in the 90s, [companies] signed big, whole-of-outsourcing deals that were ten years long, hired a team of advisors who would all leave when you put the contract in the drawer, set up a skeleton staff, and it was all meant to take care of itself,” she said.

“The megadeal is not in favour anymore … Once you have shorter deals, you have more of them. You can’t really rely on external consultants to just come in and go.”

Henderson said Westpac and its global peers were trending towards three- to five-year-long deals with best-of-breed technology vendors.

Last December, the bank renewed a decade-long infrastructure outsourcing contract with IBM that technology executive Bob McKinnon had previously found “dysfunctional”.

Under the new five-year agreement, the bank planned to take “greater accountability in the design and management of IT services”, using other suppliers or solutions where appropriate.

The bank has since inked deals with Microsoft, Fujitsu and EMC, replacing IBM’s Lotus Notes and legacy storage arrays.

“When we first outsourced, we outsourced everything to IBM, including telecommunications. Five years into the deal, that all changed,” Henderson explained.

“What we’re not seeing anymore is organisations handling all of their IT over to a vendor.

“The new relationship we have with IBM is very much functional and very important to us … We are signing with other partners and IBM is in many cases a part of that.”

Henderson said Westpac had spent two years “moving on” from issues with transparency and accountability in the IBM contract. That process concluded 18 months ago.

The bank was now focused on developing “more strategic engagement” with key vendors, she said.

Panellists urged attendees to establish joint goals and “innovation KPIs” [key performance indicators] with vendors, ensure a cultural fit, and use structured processes to strike new deals and “sweat” existing ones.

Deloitte partner Warren Green said vendor relationships required “a lot more … than procurement”, and organisations should engage with outsourcers in the same way as they would an internal team.

“If you want the vendor’s A-team, then put your A-team on it,” he said.

Henderson said Westpac had a “very strong executive buy-in” to technology projects and had established a multi-skilled A-team in commercial and vendor management by hiring people with commerce, legal and finance backgrounds.

Technology was now the “assembly line” of banking products, she said, and effective vendor management was the “holy grail” of delivery.

“If you think about a five-year contract, you may spend the first six to twelve months transitioning in, the last two years to 18 months getting to the end, and you only have a bit of time in the middle,” she said.

“The vendor management team are really important in working a deal; a lot of that comes down to how that team is skilled up.”

Henderson said her team needed to understand Westpac, vendor organisations, and “people: what makes them tick, what makes them care about things and what their priorities are”.

Vendor management staff had to be able to influence and persuade people, and possess “a bit of intuition – that’s where you go from vendor management to relationship management,” she said.

“Most importantly, a lot of these new hires have come from non-technology backgrounds,” she noted. “They’re bringing a skill mix that is not so common within the technology community into our technology area.”

Source:http://www.itnews.com.au/News/265184,westpac-hires-soft-skills-for-shorter-outsourcing-deals.aspx

Infy, HCL in race for Westpac’s $500-mn outsourcing contract

December 18th, 2009

Australia’s second-biggest bank Westpac is seeking outsourcing suppliers for contracts worth up to $500 million, with India’s top tech firms Infosys, HCL and others bidding against multinational rivals IBM and HP-EDS.

The bank, which is currently merging its systems with St George Bank, is being advised by a consulting firm on fleshing out an IT transformation programme, aimed at saving over $400 million from operations by 2011.

Australia’s top banks including Westpac, National Australia Bank (NAB), Commonwealth Bank of Australia and ANZ will invest almost $4 billion on technology this year, according to experts tracking the industry. The country’s IT market is worth around $39 billion, according to research firm Forrester.

“HCL, Infosys and Wipro, apart from IBM, are already in discussions with Westpac for these contracts — offshoring being considered as a critical portion of these engagements,” said a senior executive at one of the top tech firms exploring this opportunity. He requested anonymity because he is not authorised to comment on any potential business.

For Indian vendors, Westpac contract offers an opportunity to gain business from IBM, which is due to renew its contract with the bank next year. While Infosys declined to offer any comments because of its ‘financial silence period’, officials at HCL did not respond to an email query sent by ET on Thursday. Westpac officials, too, did not respond to the ET query.

Westpac, which acquired St George Bank last year for $19 billion, wants to have a common general ledger and consolidate other systems, including payroll. The IT integration costs alone will be around $338 million, apart from an additional $168 million being earmarked towards outsourcing and restructuring.

“Apart from the integration with St George, Westpac is also seeking suppliers for over $250-million application development and maintenance contract,” a consultant said.

Source: http://economictimes.indiatimes.com/infotech/ites/Infy-HCL-in-race-for-Westpacs-500-mn-outsourcing-contract/articleshow/5349895.cms

IBM looks on as Westpac’s Kelly says mega outsourcing trend is shifting

November 5th, 2009

Westpac CEO Gail Kelly has broadly hinted that the bank is unlikely to renew its decade-long IT outsourcing deal with IBM, as banks move away from all-in-one mega deals to more tactical best-of-breed outsourcing arrangements.
Speaking to analysts after the presentation of the Australian bank’s financial results, Kelly suggested that the banking industry’s fixation with mega outsourcing deals was drawing to a close.

“Ten years ago there were a number of large institutions that went for the all-in outsourcing arrangement, but I think that the models have changed,” she said. “I think one is much more likely to look at the different elements and make sure you have the right partner for all the elements; your desktop may be a different solution to your main frame for example.”

The switch in emphasis implies a rethink of the bank’s ten-year multi-billion dollar deal with IBM, which entailed the outsourcing of mainframe and mid-range computing and desktop services in 2000 and is due to expire next year.

Westpac is currently working through a A$700 million programme to integrate its operations with recently-acquired St George Bank. Of the $392 million so far spent on the project, $146 million was spent on IT systems and operations, with a further $103 million attributed to restructuring and outsourcing.

Kelly said that the bank will continue to lean on a mix of outsourcing and offshoring as it completes the integration project: “With the very significant program of work we’ve got on our agenda of the next few years with regards to technology we could not possibly actually source all the skills we need right here so it makes sense for us to leverage skills as they exist elsewhere; perhaps with IBM themselves and maybe with developers elsewhere.”

Source:http://www.finextra.com/fullstory.asp?id=20700

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