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

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

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."

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