Commerzbank plans to outsource IT to IBM

IDG News Service - Commerzbank AG plans to follow in the footsteps of rival Deutsche Bank AG and outsource a chunk of its IT operations to IBM.

The German bank and IBM are seeking approval from the German antitrust authority for the outsourcing deal, which would involve up to 500 employees, Anja Scheidgen, a spokeswoman for the authority, said Thursday. Pending no complications, approval could come as early as December, the spokeswoman said.

According to Scheidgen, it is standard procedure in Germany for companies to register not only planned mergers but also deals that involve merging part of one company's operations into the operations of another.

Financial and operational details of the Commerzbank IT outsourcing contract weren't available.

The deal, if approved by the antitrust agency, would be IBM's second big outsourcing contract with a German bank, after its groundbreaking agreement with Deutsche Bank nearly a year ago. That 10-year contract, valued at approximately $2.5 billion, involved outsourcing the bank's computer centers and smaller server sites in Belgium, Germany, Italy, Poland, Portugal, Switzerland, Spain and Luxembourg. The bank expects to save around $1 billion in IT operating costs over a 10-year period.

Since announcing the deal, Deutsche Bank has also decided to consolidate internal management of global network operations in its corporate investment and private customer asset units, in an ongoing effort to optimize operations and lower costs, bank spokesman Klaus Thoma said Thursday. Instead of each unit managing its own network, one team will be responsible for managing a global network, he said.

In addition, Deutsche Bank has decided to "substantially" reduce the number of telecommunication companies providing network services to the bank, Thoma said. T-Systems International GmbH, a wholly owned subsidiary of Deutsche Telekom AG, will provide network services to Deutsche Bank in Germany, Italy and Spain, while AT&T Corp. will provide services in North America, according to the spokesman. The bank has yet to decide on a provider in the U.K., he said.

Speaking at a conference earlier this month, Deutsche Bank Group Chief Technology Officer Clemens Jochum said the bank has slashed costs by $598 million over the past two years and is far from finished, though he didn't quantify how much IBM alone has contributed to the bank's cost-cutting efforts. The bank is "definitely seeing success" in its efforts to transform fixed costs into variable costs, he said.

However, aware of the fierce competition that has led to consolidation in the outsourcing sector, Jochum warned of a possible monopoly emerging. "We fully support competition in this area," he said.