Electronic Data Systems Corp. has scored another tactical victory in its battle for to secure smaller and more lucrative contracts, this time with .Net-centric Bank of Queensland (BoQ), spinning its current 10-year outsourcing agreement out to 12 years.
First contracted in 2002, EDS was taken on by the bank to conduct a ground-up IT overhaul which included a complete infrastructure replacement and rollout of Internet banking as the bank took a greenfields approach to its technology strategy.
The total worth of the BoQ contract is now $620 million over 12 years to 2014, or a $51.6 million a year and comes at a time when the future of EDS" decade-long tenure at the Commonwealth Bank (CBA) is being called into question by market analysts.
Last week, the CBA jettisoned its 35 percent stake in EDS Australia for $173 million with the bank saying an equity investment in an outsourcing provider was no longer core to the bank"s future strategic direction.
CBA"s 10-year contract with EDS, inked in 1998, is valued at $5 billion and ends in two years.
While the BoQ extension will undoubtedly provide a level of comfort to EDS, the bank"s IT operation is also widely regarded one of the least risky in Australia by virtue of the fact it was to successfully demolish and rebuild its IT architecture prior to taking a substantial push to expand the bank interstate in 2003.
As a resulting, BoQ carries almost no legacy applications in comparison to the dozens its competitors are required to support as it effectively only entered the online banking market in 2002 - a move that does not appear to have hampered expansion plans with BoQ expanding its branches from 92 branches to 163 since its IT overhaul.
However, the contract extension has also come at the expense of margins for EDS, with BoQ managing director David Liddy estimating the new contract extension will net savings of $100 million in costs "over and above the original 10-year contract".
"We expect the annual benefits to exceed our original expectations by the end of the current contract," Liddy said. "The extension also gives the bank ongoing certainty and supports long-term planning processes."
Liddy said BoQ aimed to open "100 interstate branches by August 2006", adding he was "confident of achieving increased efficiencies from our new banking platform."
Under the outsourcing agreement, EDS currently manages all IT infrastructure, applications and business process services with "fulfilment of customer and sales service requests" also managed by EDS across consumer and business banking from multiple channels.