ABN Amro Taps Five Vendors In Massive Outsourcing Initiative

As first reported Wednesday by InformationWeek, ABN Amro is turning over the bulk of its IT operations to a consortium of outsourcing vendors under contracts worth more than $2 billion. The Amsterdam-based financial company formally unveiled the move Thursday.

The services agreements come as part of a broader reorganization of ABN Amro's IT operation, which will shed about 3,200 full-time positions. ABN Amro says it expects to save about $258 million annually, beginning in 2007, as a result of the shake-up.

ABN Amro has tapped five vendors to handle its technology operations. IBM will provide infrastructure support services and some application development under a five-year deal. Accenture, along with offshore firms Tata Consultancy Services, Patni Computer Systems, and Infosys Technologies, will also provide application-development services. Infosys and TCS will handle application support. The contracts represent the most money committed by a Western firm to offshore service providers under a single initiative, though a specific breakdown by vendor wasn't immediately available.

Analysts says it's all a sign that Indian IT firms are increasingly being invited to the table to bid on contracts that are global in scope. "I would expect to see a lot more of these kinds of deals going forward," says Cindy Shaw, who tracks IT services for investment firm Moors & Cabot. It's expected that most of ABN Amro's technology work will be carried out in India, where costs are about one-third of those in Western markets.

The deals also highlight another growing trend in the IT-services industry. Increasingly, multinationals are spreading their outsourcing contracts over a number of service suppliers rather than going with a single vendor. "It's the new model in outsourcing," says Richard Patterson, who heads IBM's outsourcing operations in the Asia-Pacific region. By using multiple vendors, CIOs hope to reduce risk and get better pricing.

Patterson notes that the emergence of standards that call for common ways of implementing basic IT operations are making it easier for vendors to team up on behalf of a single client. "We're getting better at partnering," Patterson says.

Among the more significant sets of standards gaining wider adoption is the Information Technology Infrastructure Library, which is published by the United Kingdom's Office of Government Commerce and specifies best practices for a number of IT functions, including change management, incident management, and security.

Powerful CIOs are also forcing vendors to play nicely. General Motors Corp. technology chief Ralph Szygenda last year brought together representatives from several major vendors to discuss ways in which they could better cooperate and adopt common processes. Many believe the talks were aimed at creating an environment in which GM can tap a consortium of vendors to handle its outsourcing needs when its 10-year contract with EDS expires next year. Sources say EDS, IBM, and Accenture, along with offshore player Wipro Technologies, all are candidates to get considerable portions of the work.