Scotiabank picks IBM Canada for $578 million outsourcing deal

Toronto-based Scotiabank has hired IBM Canada Ltd. in an outsourcing deal worth $578.3 million over seven years. According to the agreement, IBM Canada Global Services will manage the bank's domestic computer operations, including data centers, branches, automated teller machines (ATM) and the desktop PCs of 24,000 employees.

Said by IBM and Scotiabank to be the first of its kind for a major Canadian bank, the deal, which was announced yesterday, takes effect May 1. It's one of the largest deals thus far for IBM Canada Global Services, said Rick Horton, general manager of that group.

The bank has two primary data centers in the Toronto area, where mainframes and servers are located. It has 1,100 branches across Canada, 2,100 ATMs and some 5 million customers in Canada. Scotiabank also has operations in 52 countries with about 52,000 employees worldwide, said Peggy Mulligan, the bank's executive vice president for systems and operations.

About 450 Toronto-based Scotiabank employees will lose their jobs with the bank but will be offered jobs with IBM that are at least equivalent to their existing positions. IBM found this aspect of the deal particularly attractive because it was a way to pick up IT professionals with financial services background, Horton said.

Many of the 450 will work on the Scotiabank project, he said, adding, "we're happy to get them."

Scotiabank spent "an extremely intense period of due diligence" lasting about eight months searching for the right vendor to handle the outsourcing, Mulligan said. IBM emerged as a prospect because of the company's overall competitiveness, breadth of experience and range of specialists, she said.

The bank decided to outsource key IT functions because "we really want to focus on our core business, which is delivering financial services," Mulligan said.

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