Bank poised to sign IBM £100m deal

Barclays' outsourcing initiative could spark copycat moves by rival banks. Nick Huber reports.

Barclays' outsourcing initiative could spark copycat moves by rival banks. Nick Huber reports.

Barclays Bank is in discussions with IBM to outsource its IT infrastructure in a deal estimated to be worth more than £100m a year.

Although it has not yet been concluded, Computer Weekly has learnt that IBM Global Services is the frontrunner to clinch the deal, which could see thousands of IT staff at the bank transfer to the outsourcing giant.

The move towards outsourcing is driven by the need to cut costs. Barclays has told its IT staff it needs to make savings in order to meet its long-standing target of reducing costs across the group by £1bn by 2003.

A spokeswoman for Barclays refused to comment on whether it plans to outsource to IBM, but said that outsourcing was one of a number of options under consideration as part of an ongoing group-wide efficiency review.

The IT infrastructure covered by the proposals includes Barclays' mainframes and desktops, sources said.

Outsourcing experts said such a deal would be a landmark moment for outsourcing in the banking industry, and predicted that it would trigger similar deals among other high-street banks, eager to cut costs. "Wholesale outsourcing among other high-street banks is inevitable," said one industry watcher.

Barclays commitment to outsourcing was first revealed by Computer Weekly in 2000. Confidential documents show a radical shake-up of the high-street bank's IT strategy, centred on large-scale outsourcing and heavy investment in customer relationship management technology.

A deal with Barclays would cement IBM's reputation as the leading outsourcing supplier for high-value and high-risk business in the financial services sector.

Earlier this year American Express, which runs one of the world's largest IT organisations, signed a £2.8bn, seven-year contract for IBM to take over its IT operations.

But IBM has also suffered a number of high-profile setbacks in its outsourcing contracts and proposed deals.

In November, a planned £400m agreement with Zurich Financial Services in the UK which would have seen nearly half of Zurich's IT staff transfer to IBM Global Services collapsed at the eleventh hour. Last year insurance giant CGNU scrapped a seven-year £124m outsourcing contract with IBM after only two years, as part of a post-merger IT consolidation plan.

Over the past few years large-scale outsourcing has become an increasingly popular option for companies which are keen to reduce IT costs and concentrate on running their core businesses. However, there is still little hard evidence that such huge outsourcing deals have lived up to the hype and delivered cost savings to the corporate user.

IBM declined to comment.

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