International Business Machines Corp. has landed servicing deals with three foreign banking companies, including a core systems conversion project, and says the contracts could augur additional spending by U.S. and foreign banks alike.
June Yee Felix, IBM's general manager of banking solutions and strategy, said the contracts announced Wednesday with Allied Irish Bank, Standard Bank Group Ltd. of Johannesburg, and the Bank of London and the Middle East PLC reflect global trends. Banks around the world are showing interest in areas such as core accounting systems and data security, she said.
"We're seeing quite a bit of movement by our bank customers," Ms. Felix said.
She cited Financial Insights' projection that banks worldwide would spend $170 billion on technology this year, despite fears of a slowing economy and an ongoing credit crisis.
Large bank projects often lead to long-term engagements for IBM, Ms. Felix noted.
Perhaps the biggest of the deals is the contract to convert Allied Irish Bank's core banking systems to a single Flexcube core from i-flex solutions ltd. of Mumbai, a vendor that is majority owned by Oracle Corp. of Redwood City, Calif.
IBM, of Armonk, N.Y., said the three-year contract with Allied Irish would be worth $66 million.
i-flex announced Allied Irish as a customer last January, saying the Dublin bank would convert a number of individual banking applications to the i-flex core.
V. Senthil Kumar, i-flex's chief marketing officer, said Wednesday that the conversion actually began in 2005 with some of Allied Irish's international operations, which are now in the first phase of the conversion.
"There are two considerations here: the application itself," which involves moving customer accounts from the older systems; and the integration process, "bringing all of them to a single production environment and rationalizing that environment," Mr. Kumar said.
The Allied Irish project relies on service-oriented architecture, in this case IBM's WebSphere. Ms. Felix said this "componentized" approach is more flexible and economical than past implementations that relied on wiring together systems in a unique fashion.
Service-oriented architecture also enables banks to more easily consolidate data centers and individual servers, which cuts equipment and energy costs.
Jost Hoppermann, an analyst at the technology research company Forrester Research Inc. in Cambridge, Mass., said Europe and the Asia-Pacific region are particular "hot spots" for bank technology spending.
In developing markets, banks are building modern financial infrastructures almost from scratch, while European banks have to deal with major changes to their financial system, such as the Single Euro Payments Area, which is to replace national-level payment systems with systems that span the continent.
As a result, Mr. Hoppermann said, "The renewal of the core banking platform is definitely a global trend."
Ms. Felix said developing markets, from China to Latin America, often have an advantage over more established economies in adopting new technology. "They don't have as much legacy [equipment] as the rest of the world," she said. "In some of these markets they're ahead of the more developed countries."
IBM's contract with Standard Bank involves upgrading its Argentine branch with modern hardware and software using service-oriented architecture.
Bank of London and the Middle East PLC, a start-up investment bank that complies with Islamic Sharia law, has selected intrusion prevention technology from IBM's Internet Security Systems unit.
Data security is critical for financial companies, because breaches cause highly visible losses that pose operational and reputational risk, Ms. Felix said. "Regulators are piling on, too."
