March 05, 2002

Bank of America has completed the task of outsourcing the servicing of its ATM network, signing a seven-year deal with Diebold to take over the maintenance of 10,000 machines. The agreement covers maintenance service in the western United States, plus existing contracts previously awarded to Diebold in the eastern United States.

The bank expects to achieve significant savings from the deal, under which Diebold will provide first- and second-line ATM servicing. That includes maintenance of the bank's central site processing equipment, physical security and office equipment.

The deal excludes PC maintenance, alarms and branch automation. The bank also retains responsibility for monitoring the network. "From an ATM perspective, the only thing we're outsourcing is the core maintenance-first- and second-line maintenance services. Everything else stays in the bank," said Kirk Lindsey, senior vice president of ATM fulfillment and services at Charlotte, N.C.-based Bank of America.

Outsourcing ATM maintenance is not unique in the industry. "In today's world it's more unusual for it to be done in-house," said Lindsey, adding that the bank has enough density in certain markets that maintaining its own ATM network in those markets made sense. However, in most markets, outsourcing was more economical.

The outsourcing package, which covers BoA's nationwide ATM network, is worth $71 million annually. Under the agreement, 1,000 bank employees who were responsible for servicing the ATMs, will be moved to Diebold, a Canton, Ohio-based firm that employs more than 12,000 people in 80 countries and had annual revenues of $1.7 billion in 2000.

Diebold's willingness to take on the bank's employees helped clinch the deal. "They did right by our associates," Lindsey said. "It was a good deal for our associates and gave them an opportunity to continue to work in the line of business they were in."

In other outsourcing news, Bumiputra-Commerce Bank (BCB), Malaysia's second largest bank, has signed a US$250 million, 10-year contract with EDS to build and manage the technology infrastructure for EPIC-I, BCB's new financial information technology (IT) and back office processing subsidiary.

The deal-the largest-ever outsourcing contract in Malaysia and the first-ever in the country's banking industry-is part of a long-term plan by BCB to outsource non-core functions.

"By forming EPIC-I as our technology subsidiary, we are taking a major step towards increasing our efficiency in order to be prepared for increased competition from foreign banks," according to Dr. Rozali Mohamed Ali, managing director and chief executive officer at $17.6 billion BCB.

EDS will provide application development and management services; manage the company's mainframe, midrange systems and network; and manage desktop computers and servers.

"The solutions EDS will provide for EPIC-I primarily focus on cost savings of at least 20 percent-achieved with economies of scale, new technologies, re-engineered processes and improved staff productivities-which will help enhance competitiveness for BCB and EPIC-I at low risk," said Doug Frederick, president of EDS' Information Solutions.

EPIC-I commenced operations January 1, 2002. As a part of the agreement, more than 350 BCB IT employees located in Kuala Lumpur are expected to transition to EDS over the next 15 months.