by Beth Bacheldor

IBM Wins Big Outsourcing Gig with Australian Bank

Nov 24, 2010
Enterprise Applications

The five-year deal is reportedly valued at more than $1 billion.

Gosh, it seems like I’ve heard this before. You know, the one about the fact that few outsourcing deals these days are jumbo gigs worth multi-millions or even billions. Don’t tell that to Australian bank Westpac Group, which has just hired IBM to supply infrastructure services for a (reportedly) $1 billion or more.

The five-year outsourcing deal is an extension of an outsourcing agreement the two organizations signed in 2000, according to an IBM press release. The new deal is supposed to augment Westpac’s technology transformation program. In the press release, IBM does not disclose the value of the contract. But in this article in The Australian, the deal is worth more than $1 billion.

According to that article, Raj Mudaliar, IT services analyst at IDC Australia, said he estimated the contract to be worth more than $1 billion. The article goes on to say that both companies denied media reports that the gig cost $1.3 billion. Of course, whatever the real amount is, no doubt it’s a big one.

After all, the deal puts IBM in primary control of the bank’s key infrastructure services, including services related to Westpac’s new data center, mainframe, midrange, storage, desktop, print and security operations.  The contract is built around improving service quality for bank staff and customers, lowering risk, increasing cost control and supporting Westpac’s business agility. Moreover, the contract was signed in New York Nov. 19, with both Westpac CEO Gail Kelly and IBM chairman and CEO Samuel J. Palmisano present. Methinks those chiefs’ presence is a clear indication of the size and magnitude of the deal.

In another interesting take on the deal, our sister publication in Australia talked about the reservations Westpac Group apparently had leading up to the signing party. In this article, it’s revealed that Westpac’s Kelly late last year had doubts about whether the IBM relationship would continue because of (shockingly) the trend away from long-term mega deals and toward best-of-breed approaches over shorter timeframes. Hmmm…

Westpac is definitely making an effort to keep close tabs on the gig, and to keep its options open. The deal includes two one-year renewal options, according to the article in The Australian. That article also quotes Westpac technology group executive Bob McKinnon as saying that new terms will hold IBM more accountable than it previously was via more granular key performance indicators.