Dumping IBM a last resort: McKinnon

After announcing that it would resign a $1.3 billion deal with IT services giant IBM, Westpac's chief information officer (CIO) Bob McKinnon told ZDNet Australia that IBM had the home court advantage when tendering for the deal: incumbency.
Written by Luke Hopewell on

According to Westpac's chief information officer Bob McKinnon, the decision to re-sign IBM for its massive outsourcing deal with the bank had much to do with the vendor's home court advantage: incumbency.

Speaking to ZDNet Australia today, McKinnon said that IBM had eight years of experience with Westpac, adding that the bank faced the risk of sitting stagnant for 12 to 18 months if it were to migrate to another IT services provider.

"Incumbency is always a big advantage in the sense that to move something from an incumbent service provider to another service provider requires a big investment, a lot of risk and potential[ly] 'treading-water' while you just move something without actually adding any value," McKinnon said.

"What we wanted to do was put our efforts into transforming the infrastructure, transforming our environment rather than just spending 12 months moving something from supplier A to supplier B to no net gain ... We thought that would be 12 to 18 months of just wasted effort when we could get away with avoiding it," the CIO added.

McKinnon specified however that the bank would have undergone the move to another service provider if the new deal didn't fit strict value criteria during negotiations.

"We made it very clear both to ourselves, our board and to IBM that if we couldn't get ourselves in a position where we were comfortable that it was the right thing for the bank that we would actually go through that transition."

Despite IBM having a home-court advantage in its negotiations with Westpac, McKinnon made it clear that the talks between the two were focused on squeezing more value and better service out of the relationship for the right price.

"We totally redefined all the services and responsibilities that [IBM] would provide and lined those up with our business requirements, and then we worked through the types of solutions we were looking to have under that, the type of quality elements we needed to have under that and the terms, conditions and price that would be acceptable for that outcome."

McKinnon used other companies as a price reference.

"We used a number of organisations to help us make sure the price we got was competitive and it's been a lot of hard work for a lot of people over the course of two years, but particularly the last 12 months."

The new deal between IBM and Westpac sees the IT provider operate Westpac's IT infrastructure including its brand-new datacentre, mainframe and server operations, desktop computing services including printing, as well as managing security services for the bank.


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