ABN AMRO's decision to tap EDS for a $1.5 billion outsourcing contract is the latest in a string of successes for the Dallas-based IT services company, which like its competitors has been beating the bushes for new business in a sluggish economy.
The Dutch-based banking giant chose EDS over IBM, Accenture and Perot Systems after a year-long process. The services, which will be provided to ABN AMRO's wholesale client services division, include midrange devices through desktop support, local Web servers, LAN devices plus held desk support, and all software engineering (applications development, maintenance).
ABN AMRO, in common with many institutions, sees outsourcing as a way to "variable-ize" costs, said Coley Clark, senior vice president of the financial industry group at EDS, noting that "this is not the greatest year for wholesale banking." Another factor is the set of new requirements for operational and credit risk, known as Basel II. "Basel II doesn't go into effect until 2006-7, but you need five years of history to demonstrate that you've got it under control," said Clark.
Under the five-year deal, EDS will assign several thousand employees to ABN AMRO sites in the Netherlands, United Kingdom or wherever else they're needed. A high priority will be beefing up disaster recovery capabilities. "After 9/11, institutions have had to look at their diversification not only of centers but of people. Not just in the U.S. but all over the world," said Clark.
About $3.5 billion, or 17 percent, of EDS' revenues come from financial services, with about half from Europe-based banks. Within the past year, it's signed outsourcing deals with Deutsche Bank, Bank Leumi and Westpac Banking Corp. It's also competing with IBM for a contract with JP Morgan Chase.
Some banks view outsourcing as a way to gain a foothold in North America. Deutsche Bank, for example, hired EDS to expand the check processing services it provides other banks, and to offer a national lockbox platform for its check remittance collections and document management business. "Our relationship with EDS will enable us to better satisfy the needs of our U.S. cash management clients," according to Norbert Wanninger, head of global cash management at Deutsche Bank.
Deutsche Bank will offer check processing services in Totowa, N.J., Miami and Los Angeles and lockbox services in Totowa, Chicago and Los Angeles. Part of the Totowa location will become a dedicated infrastructure for EDS' core check processing and lockbox services. Deutsche Bank retains full management of client relationships as well as services such as return items, signature verification, image archive, research and adjustments.
EDS will provide a common technology platform for servicing Deutsche Bank's check processing and lockbox clients across all sites, allowing the Bank to offer more comprehensive delivery of cash management products, as well as enhanced customer reporting and image solutions.
Excellence of service is the benchmark EDS uses to measure success with all its clients. "It's the critical element in our client relationships," said Clark. "Everything's a relationship sell."
Client and EDS executives monitor service using a "service dashboard," which indicates client satisfaction using different colors, e.g., green (good), yellow (fair), red (unacceptable), based on information from the client site.
For example, if the response time in a trading floor operation exceeds some pre-set amount (e.g., three-tenths of a second), then the dashboard would get switched to red for just that segment. "It puts a focused approach to service from EDS CEO Dick Brown on down," said Clark. "Everybody with responsibility for that customer sees that dashboard."