Big Blue won the contract after a competitive bid process and takes over from rival HP, whose seven year, $600 million deal is ending. Due diligence has been undertaken and relevant regulatory approval granted.

Under the agreement, IBM will manage the group's entire IT infrastructure, including desktop systems, servers, mainframes, local area networks and service desk.

Larry Kiernan, CTO and head, group IT, BoI, says: "We have now agreed a Group-wide solution for the provision of our IT infrastructure services and, under this agreement, will have access to a wide range of innovative IT solutions. We will continue to work closely with our existing provider, HP to ensure a smooth transition to IBM."

The initial HP contract caused huge controversy in 2003 and was nearly derailed when the bank's IT staff staged a 24-hour walk out and threatened further strike action in protest at the plans. The deal finally went ahead after a summer of wrangling in November after staff had secured improved terms and conditions for the transfer of jobs.

There was further controversy the following year when the two firms argued over who should foot the bill for the departure of disgraced bank chief Michael Soden who was forced out of his job after he was found to be surfing porn and escort agency Web sites on his office PC.

Soden's illicit computer habits came to light after a disgruntled IT staffer ran a check on his office PC. The bank blamed HP for allowing the information to become public after it was leaked to the local press, demanding the vendor pick up a portion of the tab for Soden's severance pay.