IBM Canada is taking over a big chunk of the National Bank of Canada’s information technology infrastructure needs.
A 10-year, $1.1-billion contract extension was signed Wednesday that will continue to see IBM responsible for the bank’s Web hosting services, IT infrastructure, call centre and future e-business projects. Excluded from the new deal are the areas of telecommunications and application development.
The original deal dates back to 1994 and will now continue until 2011. While the majority of services involved were already contracted to IBM, two major additions include the formation of an IBM Innovation team – an assembly of Big Blue’s research staff that will work with National to develop new business strategies and objectives. Web environment work was also added to the contract services mix.
“One of the key ingredients in the agreement is the bank would like to make a major transformation to e-business. We’ve developed an innovation team to specifically address e-business projects,” said Rick Horton, general manager of global services for IBM Canada Co. in Toronto.
Given the hefty price tag – $100 million per year for the next decade – some may wonder if the bank might second-guess itself. But that won’t happen, according to Michel Labonte, senior vice-president of finance at the National Bank of Canada in Montreal. Under the agreement the bank also becomes the beneficiary of highly competitive prices from Big Blue.
Labonte said IBM would now provide services to operate National’s computer facility, and reinforce its overall ties with the bank. “They (IBM) were already responsible for the outsourcing. We’re extending our initial contract with them and improving the governance of the contract and the partnership element,” he added.
Outsourcing has become an increasingly popular alternative for organizations that don’t have the in-house expertise or monetary resources to handle its own information technology requirements. “It’s not only the purchasing but the managing of the entire information technology asset base,” Horton said.
However, given the strict security policies that banks and other financial institutions adhere to, service level agreements (SLA) are also becoming increasingly important in cementing outsourcing deals. In essence, an SLA is a contract between an application service provider (ASP) and the company that requires an acceptable level of service to be maintained. Penalties can be imposed if the ASP breaches its service responsibility.
Horton said that there are multiple such agreements in place that cover data centre, call centre and Web hosting services.