TD Bank Financial Group Thursday handed off portions of its IT management chores by signing a $720-million seven-year agreement with IBM Canada’s Global Services unit.
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agreement covers network support, help desk, and desktop services for more than 40,000 PCs within the bank and its 1,200 TD Canada Trust branches. It excludes server and data centre management, but IBM will manage some of the file and print servers outside the data centres.
TD Bank was reluctant to discuss the agreement in detail but spokesman Neil Parmenter said IBM’s reputation and previous project work helped move the deal forward.
“”We’ve had a relationship with IBM going back 30 years in various areas of the business,”” he said. “”We wanted to align ourselves with the best partner, and IBM is a recognized leader in this business.””
The IBM deal is among the largest services contracts with a Canadian bank this year but is still dwarfed by a seven-year pact formed between HP Canada’s services organization and CIBC worth $2 billion, which included everything from PCs to IT governance.
IDC Canada analyst Dan McLean said desktop management is not the biggest area in outsourcing but is one of the fastest-growing.
“”The likes of IBM and HP are people that specialize in this area,”” he said. “”EDS is more of a company that specializes in applications; Accenture as well.””
IBM said the agreement would see its Global Services team provide TD Bank an upgrade in both bandwidth and functionality for its branches, work that would likely involve multiple partners. Parmenter said outsourcing would allow TD to focus on developing new financial services but refused to elaborate on what they might be.
Garth Issett, vice-president of strategic outsourcing at IBM Canada, said approximately 370 TD Bank Financial Group employees transferred over to IBM on Sept. 19.
“”Our normal approach is to ensure that during the transition period we’re not doing anything whatsoever to degrade the services that are delivered to the bank,”” he said. “”One would expect that as such we need to keep the employees we brought over very close to the bank.””
IBM has already built up a number of big name clients in the Canadian financial services market, including Scotiabank and National Bank of Canada. In March, IBM and National Bank Financial signed a nine-year $200-million deal to manage IT operations and introduce new Web-based offerings and workflow tools. The agreement also included enhancements to the company’s application suite to improve response times at customer service centres.
Parmenter, however, said TD paid little attention to its competitors’ outsourcing arrangements. “”That’s not something we look at,”” he said.
TD is handing over the reins of its IT infrastructure after one of the biggest projects in its history: the $475-million integration with Canada Trust, which spanned 2000 and 2001 and included the design, testing and deployment of a new IT system.
Given the pressure within the financial services industry towards consolidation, McLean said TD Bank is aware of the uncertainties ahead.
“”Here’s a deal that’s seven years’ long; that’s a phenomenal amount of time in business,”” he said. “”I would bet that there are all sorts of conditions or situations where the agreement can be revisited and either enhanced or scaled back.””
Issett said it would be inappropriate to speculate on any changes to the agreement, but not all institutions wait for a merger to end before bringing in some services expertise.
“”We’ve seen other customers come at it from the completely opposite approach. They’ve used the outsourcing as a way to accelerate their integration,”” he said.
IBM on Thursday also publicized the results of a study from Ross Research that placed it in the lead among IT outsourcing companies.
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