Swiss bank UBS is bringing the IT services it has outsourced to Perot Systems since 1996, back in house, in a move that will cost the Texas-based vendor about $50 million a year.
Perot says the amount of gross profit it has derived from UBS has ranged from $44 million to $50 million per year during the past three calendar years.
The UBS contract represented 19% of total revenue at the firm in 2003, and accounted for 85% of revenue at the vendor's financial services division in the year.
The bank has been rumoured to be on the verge of bringing its outsourced functions back in-house since April this year, when it centralised its IT infrastructure systems in one unit, known as IT International. The existing contract with Perot Systems will expire as expected at the end of 2006, but will not be renewed.
The new IT unit, which houses 2350 staff, is responsible for functions such as the management of data networks and communications systems, IT security, distributed computing and servers, mainframes, market data services, user services and desktop computing across the firm. The functions currently outsourced to Perot will also be integrated into the new ITI division.
Commenting on the termination of the contract, Scott Abbey, chief technology officer at UBS, says: "Our company and technology strategy have changed since the outsourcing agreement with Perot Systems was forged in 1996."
But Perot has managed to salvage some of its business from UBS - the bank will continue to use software services provided by its TSI unit. The vendor has also secured work for some of its employees, who will join UBS staff in managing the the infrastructure for the bank's investment banking division.
Last week, US bank JPMorgan Chase cancelled its multi-billion IT services contract with IBM, bringing functions such as data centres, help desks and distributed computing, data and voice networks - and 4000 employees, back in house.