Global CIO: Can HP, IBM, & Oracle Make Peace With Breakaway Banks?

Three huge global banks plan to revolutionize the CIO-vendor relationship—will their audacious plan trigger major changes from major IT vendors?
Playing the maintenance card, the article described Harte's desire 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 (end of excerpt).

Well—what to make of all this? Maybe it's all just a negotiating ploy on the part of the three banks—yeah, and maybe the Beatles are getting back together for a reunion. No, Commonwealth CIO Michael Harte is a very serious player and he alluded to his company's intentions in a presentation given last week to the Committee for Economic Development in Australia, and there is no way in heck that banks with the size and reputations of Commonwealth, Bank of America, and Deutsche Bank would engage in public gamesmanship on this scale.

Privately, maybe. But publicly? Fuhgeddaboudit.

What will the big vendors be able to offer to counter this initiative, due to be launched May 17? Or will they decide that they've done their best and they'll just have to let this new consortium make its way in the world?

Whatever happens, it's very likely that the breakaway bank bunch will cause Microsoft and Oracle and HP and IBM to rev up their cloud strategies and rollouts. Whether those companies will also address some of the business and revenue models that Harte and other CIOs find unacceptable is hard to say—but if any gambit can lead to such changes, this is it.


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

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