ABN Amro Outsources IT Services

As widely expected, Dutch bank ABN Amro(ABN) announced IT agreements Thursday worth 1.8 billion euros ($2.2 billion) with five companies, including the largest deal ever with an Indian services firm.

Five-year contracts were signed with IBM(IBM) for IT infrastructure; Indian outsourcers Infosys(INFY) and Tata Consultancy Services for application support and enhancements; and named Accenture(ACN), IBM, Infosys, Patni Computer Systems and TCS as preferred suppliers for application development.

Armonk, N.Y.-based IBM grabbed the biggest piece of the contract, estimated to be worth 1.5 billion euros over five years. The contract represents the most extensive rollout of IBM's data center automation technology and includes support for the bank's desktop PCs, printers and PDAs through IBM's global help desk. The contract begins Nov. 1.

About 2,000 full-time bank employees will be transferred to the IT vendors, with the majority going to IBM. The bank plans to reduce its IT staff by 1,500 full-time employees in the next 18 months and expects to save at least 258 million euros a year by 2007 through the outsourcing; it ultimately plans to have an IT staff of 1,800.

For TCS, meanwhile, the deal is expected generate revenue of more than 200 million euros, or $247 million, over the five-year period -- making it the largest deal by an Indian services company ever.

"TCS' strategy to grow in Europe and other markets in order to achieve its global vision is beginning to bear fruit," said N. Chandrasekaran, executive vice president and head of global operations for TCS.

Rival Infosys expects to receive $140 million from ABN Amro, making the deal the largest multiyear, multimillion-dollar European contract ever won by the company.

"This deal clearly indicates that large offshore players like us have a competitive business model to deliver large, global, multiyear contracts," said Infosys CEO Nandan M. Nilekani. "The deal also signifies a trend toward strategic global sourcing, where customers are selecting multiple best-of-breed vendors to help improve efficiencies in their IT services delivery."