Global CIO: Global Banks Form Consortium To Counter HP, IBM, & Oracle

Three huge banks will work together to buy at lower prices and to build their own cloud-based global banking infrastructure and network.
He wants to achieve a "step-shift in productivity" by letting the banks to "break free of the expensive annual fees that are the backbone of the infrastructure outsourcing and business software industries." And, it said, Harte has declared that enough is enough:

"We are not doing that any more," Harte told AFR. "We will be effectively buying this stuff [at] spot [prices] at an auction."

The crux of Harte's frustration with the current model, and the motivation for his largely unprecedented effort to begin competing at some level with his primary IT partners, is what he perceives to be their inability or unwillingness to move rapidly and aggressively enough to help Commonwealth and other large organization lower their cost of infrastructure and get out of the crippling 80/20 trap that sees lots of CIOs spending 80% of their budgets on internal operations and only 20% on innovation and growth projects.

"We've got 50 per cent to 80 per cent of all what we spend a year tied up in infrastructure and that infrastructure isn't conferring any strategic advantage, it's just a cost of doing business," Harte is quoted as saying.

The AFR article hammers on that point toward the end of the piece, claiming that one of the reasons that "banks are seeking to radically redefine the terms on which they deal with software companies" is "the opportunity to finally break away from the so-called 'software maintenance' payments that are imposed on customers even after they pay hefty up-front fees.

"Once viewed as an unavoidable cost of technology procurement, big corporations are now taking the fight back to suppliers in the aftermath of the global financial crisis," the article says.

Just goes to show: whenever we think that this business is all grown up, and that all the drama is past, and that things are quieting down, something unexpected happens and the competitive balance gets turned upside down. It's just hard to imagine that when the executives at Oracle or HP or IBM looked out at the world to assess where the next wave of competition would come from, that they decided it would come from three very large and very impatient global customers.

This one's going to be very fun to watch.


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GlobalCIO Bob Evans is senior VP and director of InformationWeek's Global CIO unit.

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