Westpac renews IBM outsourcing contract

Adds five more years to US$2.3 billion deal.

IBM and Westpac have extended a US$2.3 billion, ten-year-long infrastructure outsourcing relationship with a new five-year contract that would begin on December 1 this year.

The new contract was signed in New York last Friday, putting an end to speculation that the bank may replace Big Blue with offshore service providers or a "best of breed" approach.

IBM will retain prime responsibility for operating the bank's key infrastructure services, including data centre, mainframe, midrange, storage, desktop, print and security operations.

Westpac said it would take "greater accountability in the design and management of IT services", using other suppliers or solutions where appropriate.

The bank also has outsourcing agreements with HCL Australia, Telstra, Fiserv, and HP subsidiary EDS.

According to Westpac's group executive technology Bob McKinnon, the new IBM services contract would "drive a very different relationship and set us up for the future".

The bank is preparing to implement its five-year IT transformation program that was expected to strengthen its focus on customers and productivity.

It reported increases in IT spending in the first half of this year, and plans to build a "private cloud" while consolidating its "dozen" data centres across Australia.

"I'm proud to say that our relationship with IBM has come a long way over the past couple of years and we've made significant inroads to improve the reliability of our systems," McKinnon stated.

"Importantly, we have been able to retain IBM's extensive expertise and knowledge of the organisation, while also driving flexibility on key aspects of our partnership.

"This new relationship will support the significant IT investment program underway within the Westpac group to improve our customer touch-points and support our multi-brand model."

IBM's Australia and New Zealand Managing Director Glen Boreham said its relationship with Westpac had played a key role in IBM's local success.

Financial terms of the new deal were not disclosed.