EDINBURGH - Bank of Scotland Group entered a 10-year, $1 billion partnership Thursday with International Business Machines Corp., in one of the largest outsourcing deals ever struck in Europe.
IBM will take responsibility for managing and operating the bank's information technology infrastructure from September. No staff reductions are planned, although the bank will transfer 500 of its staff to IBM. The agreement could save Bank of Scotland an estimated $228 million in information technology costs over the next 10 years.
Bank of Scotland's main data processing center in Sighthill, Scotland, will become the new IBM Scottish Delivery Center.
The bank will rent accommodations to IBM.
The center will also offer information technology services to other organizations.
"The new center will provide new commercial opportunities, which in turn will lead to greater career opportunities for both the 500 staff joining us and our existing 700 people," said Richard Atkins, vice president of strategic outsourcing delivery for IBM Global Services UK and Europe North, in a press release.
"In fact," the release said, "this agreement almost doubles our presence in Scotland outside our Greenock manufacturing base, which now employs around 5,000."
The deal "provides Bank of Scotland with the opportunity to create a more technically advanced IT infrastructure than the bank could have achieved within its own resources," said Gavin Masterson, Bank of Scotland's treasurer and managing director. "As far as customers are concerned, they will be offered improved quality of service and have access to new products and services more quickly."
Bank of Scotland has had a relationship with IBM for more than 30 years. It was the first bank in the United Kingdom to offer PC-based banking in 1985. It launched Europe's first end-to-end Internet mortgages in October, and it was the first U.K. bank to pilot phone banking using the Wireless Application Protocol in November.