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ABN Amro Holding NV expects to cut its annual information technology budget by 10%, or $318 million, by outsourcing much of its technology development and maintenance to International Business Machines Corp. and four other vendors.
The five-year, $2.2 billion deal, which the Dutch banking giant announced Thursday, also includes what it called "in-house consolidation," job cuts, and the outsourcing of some work to India.
Amro said the project, which will start in 2007, will affect all of its business units around the world. Executives did not provide details on the effects on U.S. operations.
"First and foremost is saving costs," said Ron Teerlink, the chief executive of Amro's group shared services unit, which provides technical support to the rest of the company.
The deal also will reduce operational risk and give the company "earlier and better access to new technology," as well as more flexibility, executives said.
The biggest share of the outsourcing work - $1.8 billion over five years - will go to IBM, of Armonk, N.Y., which will provide the IT infrastructure and application development, Tom de Swaan, Amro's chief financial officer, said in a conference call Thursday morning from Amsterdam.
Two Indian outsourcers will maintain and enhance Amro's existing software. Tata Consultancy Services Ltd. of Bombay will receive $247 million for the work, while Infosys Technologies Ltd. of Bangalore will receive $123 million, Mr. de Swaan said.
Those three companies, along with the New York consulting firm Accenture and the Bombay software firm Patni Computer Systems Inc., will be "preferred providers" for new applications, he said.
Lars Gustavsson, Amro's chief information officer, said it has made no specific financial commitments to Accenture or Patni. His company plans to let all five providers compete for software development projects and choose a provider according to "competency, price, and performance."
For the last two and a half years Amro has outsourced IT support for its wholesale banking unit, and it has worked for years with a variety of technology providers, he said. "We decided to direct more volume to fewer vendors."
It chose to work with a handful of outsourcers because "there is no single vendor who can satisfy all the different needs of the bank," Mr. Gustavsson said.
Mr. Teerlink said Amro also outsources some transaction processing to a captive vendor in India (which he did not name) that has 3,000 employees. Mr. de Swaan said Amro might move more processing work to that vendor as well.
According to Mr. Teerlink, 1,500 of Amro's 5,300 IT staff members worldwide will lose their jobs. Another 2,000 will be transferred to the vendors - 1,800 of them to IBM. The remaining employees will manage the company's relationships with its vendors, define their duties, and test new software and systems.
Mr. Gustavsson said Amro plans to keep information security functions in-house, and it will retain patent rights to any technology the vendors develop for the company.
"Service levels will remain absolutely stable," Mr. Teerlink said. "That is key. We are not going to take any risks with that."
Bill Bradway, the group vice president of retail financial services at Financial Insights Inc., a Framingham, Mass., unit of International Data Group, said the program strikes a useful balance for Amro.
The program guarantees that Amro can turn to "a couple of firms with the right sets of skills and business contexts for what a project may require" while ensuring that it gets "competitively priced providers," Mr. Bradway said.
