ABN Outsources Computer System Work

In one of the largest outsourcing deals in European banking, ABN AMRO signed a $2.2 billion contract on Thursday with five technology firms to manage and develop its computer systems.

The Dutch banking group said it would cut 1,500 full-time information technology jobs, helping it to generate annual savings of $319 million from 2007. An additional 2,000 jobs will be transferred to the technology companies, primarily to International Business Machines. Sierk Nawijn, an ABN spokesman in Amsterdam, said 950 of the jobs would be cut in the Netherlands, with the rest split between units in Chicago and Brazil. The five-year contract was spread between IBM, Accenture and three of their Indian rivals Tata Consultancy Services, Infosys Technologies and Patni Computer Systems. In a statement, ABN AMRO's chief operating officer, Hugh Scott-Barrett, said, "We expect that this IT program that is shared across the group will contribute to the savings in line with the earlier estimates made by the bank, while improving IT services within the group."

The financial details of the five-year contract were not provided. IBM said in a statement on its Web site that its share of the deal was worth 1.5 billion, or $1.8 billion, over five years.

The deal marks a breakthrough for India's software outsourcing firms.

The largest of them, the Mumbai-based Tata Consultancy Services, said it expected revenue of more than $247 million from the contract; Infosys Technologies, the second-largest, said it expected the deal to be worth $140 million now, though that could grow to as much as $250 million over five years. That makes the contracts the largest ever won by Indian companies, they said.

The Infosys Technologies chief executive, Nandan Nilekani, described the contract as a "landmark deal."

"This deal clearly indicates that large offshore players like us have a competitive business model to deliver large, global multiyear contracts," he added.

Other European and American banks have been aggressive in outsourcing their software and technology operations to top Indian outsourcing firms. ABN had said last year that it would cut 2,850 jobs, or about 3 percent of the total work force, to help restore profit growth.