Bank of Ireland shortlists IBM, HCL for $600-mn outsourcing deal

BANGALORE: Bank of Ireland has shortlisted HCL Technologies and IBM for an outsourcing contract potentially worth over $600 million, replacing incumbent vendor HP, which had signed a seven-year deal with the bank in 2004. (Watch)

The outsourcing contract will involve management of the bank’s IT infrastructure including desktops, servers, printers and other communication networks.

When contacted by ET on Tuesday, a spokesperson for the Bank of Ireland confirmed that both HCL and IBM have been shortlisted.

“After a detailed evaluation and assessment process over the past nine months, a decision has now been taken to proceed with a shortlist of two suppliers, HCL and IBM, to the next stage of the competitive process which is expected to be completed in the coming weeks,” said Cora Whyte, the bank’s spokesperson.

While IBM is known for bundling its hardware products with services and offering more lucrative rates to customers for a larger share of the business, Indian firms including HCL have started winning larger deals too. Recently, HCL won a $500 million contract from US-based Merck Sharp and Dohme.

Incumbent HP is set to lose the contract to either HCL or IBM. The seven-year long contract due to expire next year was worth $600 million when signed in 2004.

“The Bank is some months into a competitive tender process, assisted by third parties, with HP and a number of other external suppliers, focusing on service enhancements, improved customer experience, cost savings and efficiencies. As a result, Bank of Ireland will not be progressing further with HP as part of this process,” Whyte said.



Meanwhile, the outsourcing contract will have to pass the hurdles posed by trade unions pushing for a severance package and employment guarantees after the transaction is done.

In 2004, when the bank decided to outsource its IT work to HP, it had to agree to a one-off payment of 5,500 and job security for two years for the 500 employees.

And since the Bank of Ireland is over 30% owned by the government, any vendor will have to address the local employment issues. Last year, Ireland injected around $8.6 billion into Bank of Ireland and Allied Irish Banks to cope with the financial crisis.
However, the cost benefits of outsourcing far outweigh these issues. Several private sector organisations have been leveraging offshoring of non-core IT management.

By outsourcing the management of their desktops, computer servers, storage and communication infrastructure, customers such as Nokia, Xerox and Citigroup plan to have leaner balance sheets, reduce their operational expenses by up to 40% and focus better on their core business.

The global market for IT infrastructure outsourcing has been growing. For instance, the top 15 vendors analysed by research firm Forrester in a recent report provided remote and onsite services for about 16.7 million desktops, 1.7 million servers and 23.4 million users globally. These vendors, including IBM, HP-EDS, CSC and some Indian tech firms such as HCL delivered $83.9 billion worth of infrastructure services last year.