Barclays and IBM opt for £35m risk and reward deal

Barclays Bank's £35m deal with IBM for a series of heavyweight IT projects has re-ignited industry debate over the merits of...

Barclays Bank's £35m deal with IBM for a series of heavyweight IT projects has re-ignited industry debate over the merits of "risk and reward" contracts.

Under the three-year deal, announced last week, IBM will share the costs of any project which does not succeed. IBM middleware software will be used in more than 20 Barclays IT projects.

Industry experts said the jury is still out on the merits of complex risk and reward contracts, which could prove too time-consuming for firms involved in smaller projects.

The Barclays IT projects are part of a drive by the high-street bank to remodel its IT infrastructure on Internet technologies.

The risk and reward deal involves the user and supplier clearly defining the risks and rewards and assigning responsibility for them.

"Risk and reward depends on the level of risk involved," said Danny Jones, programme director for outsourcing consultancy Morgan Chambers.

"The Barclays [£35m deal] is billed as critical to the business and you would want a supplier that gives 110%. But for other less-critical projects you don't need to invest all the time and effort."

A new key project involved in the IBM deal is a new Internet banking and cash management service for medium and large companies. It is due to go live in the first quarter of next year.

The project, which is in its pilot phase, will offer firms with a turnover of more than £1m features they cannot get from more basic online banking services aimed at small business, Barclays claims.

New features planned for the service, Barclays Business Internet Banking (BBIB), include the ability to make batch payments and same-day payments.

"This service is a bit of a rare thing," said Tony Lanser, performance manager for electronic banking at Barclays. "We will be pushing BBIB as an essential part of a business infrastructure."

Customers will access the service through a special Web site, using smartcard technology from Gemplus, for security.

Currently about 45,000 medium to large companies use a direct dial banking service from Barclays, for sending payments via PCs.

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