Bank of Scotland outsourcing deal: a calculated risk

How committed is your IT department to outsourcing? Last week's 10-year, £700m outsourcing deal between Bank of Scotland and IBM breaks new ground in the banking industry. Under the deal IBM will operate and run the bank's IT infrastructure, with more than 500 staff transferring to IBM.

The bank claims it will save £150m in IT costs and allow it to draw on the large pool of talented IT labour. Very handy for future e-business ventures.

But whatever the potential benefits of outsourcing one question mark continues to hang over the deal like summer smog.

Remember the crippling 12-year outsourcing deal between East Midlands Electricity and Perot Systems? Seven years on Powergen finally pulled the plug after acquiring the utility.

Bank of Scotland argues that its contract is flexible enough to accommodate its evolving business and IT needs. The bank also insists that it remains in overall control of IT policy, helped by a 70-strong team of project managers to monitor IBM's efforts.

So outsourcing remains as unpredictable as ever. Banks don't gamble so we all have to reserve our judgement on this unusual deal.