ABN Amro/Digital Island hosting trial scores 25% savings 

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March 19, 2001 (Computerworld) -- ABN Amro Bank NV, the world's 16th-largest bank, announced last week that an experiment with outsourcing Web hosting has paid off with savings of 25%.

The bank's outsourcer, San Francisco-based Digital Island Inc., is hosting eight Compaq 5500R data ser vers in a London data center. Digital Island is also providing networking and security for the Amsterdam-based bank's global financial markets e-commerce site.

It's an unusual move for a large bank, said Octavio Marenzi, the managing director of Celent C ommunications LLC, a consulting firm in Boston.

"Typically, the smaller banks do this," Marenzi said, explaining that large banks tend to have some qualms about outsourcing because they're concerned about control and security.

Security is a major conce rn, according to Debra Rossi, executive vice president of business Internet services at San Francisco-based Wells Fargo & Co., which hosts its Web sites in-house.

"You want to have proper controls in place to manage customer information," said Rossi.

AB N Amro's outsourcing decision is unusual not only because of the bank's size, but also because it deals with a corporate banking service.

"It's more frequent on the retail side," Marenzi said.

Downsides to outsourcing include loss of control and increa sed complexity.

"There's one more vendor relationship to manage," Marenzi said. "If something goes wrong, it may be harder to track down where."

On the plus side, the vendors are able to spread the costs over a large number of users - making a 25% savi ngs figure reasonable, even conservative, he said.

According to Digital Island spokesman Paul Abbott, the ABN Amro site handles $100 million in transactions daily and focuses primarily on offering bonds and foreign exchange transactions to the top 250 gl obal institutional fund managers.

The bank expects the site to handle $1 billion in daily transactions within a year.

"ABN Amro expects its wholesale client business to increase exponentially in the coming years," David Woods, the bank's managing direct or for e-commerce, treasury and fixed income, said in a statement.

Outsourcing the hosting offered a scalable and a secure environment for the site, he added.

Faster to Market

By going with Digital Island rather than hosting the site in-house, t he bank was able to get to the market faster and save money, according to Abbott.

Digital Island takes care of the physical equipment and the operating system, he said. "We control the physical security and the logical security in and around the box. The bank manages and owns the applications," said Abbott

Other Digital Island bank customers include New York-based J.P. Morgan Chase & Co., whose backup system is hosted by Digital Island.

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