Abbey EDS deal heralds new era for financial IT

Abbey National's £35m joint venture with EDS to service its mortgages and personal loans heralds a new era of IT partnerships in...

Abbey National's £35m joint venture with EDS to service its mortgages and personal loans heralds a new era of IT partnerships in financial services, according to industry analysts.

Nick Huber

The agreement, announced earlier this week, will service almost two million accounts and highlights a new trend in outsourcing.

Abbey National said it will make £9m in cost savings per annum under the joint venture, which is due to start in May. Abbey National customers will be able to manage their mortgages and loans over the Internet and via digital television through the service.

Over 1,700 Abbey employees will transfer to the joint venture in May, including IT staff. Abbey National also plans to use the joint venture as an administration service for other lenders.

Analysts said the deal indicated the rise of a new form of outsourcing as companies strive to push down the cost of administration by linking up with IT suppliers and services companies.

Last year, high street banks Lloyds TSB and Barclays outsourced their cheque processing to computer services company Unisys, creating a jointly owned subsidiary (see box).

Alexander Drobvik, vice-president for e-business at IT analyst firm Gartner Group, said, "Companies will look at business processes where they are not world-class and get other companies to operate them. They are also working with partners to find people in the same market. It is outsourcing operating in a more intimate way."

But the new breed of joint venture outsourcing - particularly if it involves real-time Web services - raises the stakes for users if a service goes wrong, Drobvik said.

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Joint ventures and alliances

Cheque processing (August 2000)

Barclays and Lloyds TSB outsource cheque processing to Unisys in 10-year joint venture. Unisys takes 51% stake in subsidiary company, Intelligent Processing Solutions Limited (IPSL)

Mortgage applications (February 2000)

The UK's leading mortgage providers link their back office systems over the Web to provide a mortgage acceptance in principle within minutes. Based around a specially developed XML standard

Mortgage and loan processing (February 2001)

Abbey National and EDS announce "agreement in principle" for a joint venture for servicing Abbey's mortgages and personal loans. Abbey to invest £35m in first two years of venture. There are plans to offer the system as a service to other lenders.

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