CommBank gnaws off $1bn from EDS contract

Summary:The Commonwealth Bank of Australia announced today that before the year is out, it will finalise contract negotiations with HCL, IBM and Tata Consultancy for application services work worth AU$1 billion over five years.

The Commonwealth Bank of Australia announced today that before the year is out, it will finalise contract negotiations with HCL, IBM and Tata Consultancy for application services work worth AU$1 billion over five years.

Like its government counterparts, CBA is following a multi-sourcing strategy for its outsourcing requirements, citing "greater contestability" as a key reason for its decision, CBA said in a statement today.

Except for its telecommunications services contracts that are overseen by Gen-I, a consortium including Telstra and Optus, EDS has held the lion's share of the bank's outsourcing deals for the past decade.

EDS' stake in CBA's IT operations, including the soon to end application services contract, covers enterprise processing services, and end-user computing. The total annual value of the contracts was AU$389 million in 2007.

Today's announcement means EDS will be excluded from application services, which represents almost half the value of the bank's AU $2 billion in outsourcing contracts to 2012.

IBM, Tata Consultancy and HCL will now compete for application services work, which includes development, maintenance, enhancements and consulting, and is worth approximately AU$200 million per year.

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EDS will retain 'enterprise processing services' and 'end-user computing' with CBA until 2012, worth AU$114 million and AU$74 million per year respectively.

In July, EDS won a contract extension for end user computing, covering desktops, service desks and ATMs, worth AU$372 million over five years.

Despite CBA's decision to maintain EDS on its vendor panel, the general swing towards multi-sourcing has smashed EDS' dominance over large IT outsourcing contracts.

Australian Customs Services and the South Australian government both recently axed EDS from the majority of future outsourcing contracts.

Meanwhile, the Australian Tax Office this week opened the gates on its managed network services contract, which EDS has held for the past decade. It too has announced it will pursue a multi-sourcing strategy in the future for its contracts that are worth $1 billion over a five year period.

However CBA has been the most closely aligned customer of EDS in recent years. CBA had a 35 percent stake in EDS's Australian operations until 2005 when it initiated a scheme that saw EDS buy back AU$173 million in shares from the bank.

CBA expects contracts with IBM, Tata Consultancy and HCL to be finalised within the next 10 days and will commence the transition process in the new year.

Topics: IBM, Banking, Outsourcing

About

Liam Tung is an Australian business technology journalist living a few too many Swedish miles north of Stockholm for his liking. He gained a bachelors degree in economics and arts (cultural studies) at Sydney's Macquarie University, but hacked (without Norse or malicious code for that matter) his way into a career as an enterprise tech, s... Full Bio

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