The Commonwealth Bank of Australia (CBA) has lifted the lid on the exact cost benefits achieved through its $5 billion IT outsourcing agreement with EDS.
Russell Scrimshaw, the bank's head of technology, operations and property, said the EDS deal has already netted it savings of $30 million - or 12 per cent of its projected IT expenditure - for the financial year to June 1998, a figure, he said, is expected to increase to around 20 per cent for the 1999 fiscal year.
Scrimshaw said the primary driver of the EDS-induced cost savings have come from a 'calorie-controlled' approach to its IT expenditure. Rather than merely deploying technology without regard for its impact on the bottom line, he said the bank's users are now being "forced" to consider costs when making purchasing decisions.
"We've moved from effectively a fixed-cost structure to a variable-cost structure because EDS now charges back per unit of work," he said. "Now, because people get charged for each device they have, that's forcing people to look into their cupboards and discover they have more PCs than they really need, or more printers than they really need or more phone lines into their office than they really need. It's forcing people to go back now and justify the technology they really need and return the stuff they don't need. It's forcing discipline around the way we justify expenditure on technology."
While the cost benefits are starting to seep through, many industry observers remain unsure as to how the bank's relationship with EDS is balanced with internal business requirements. Mentioning CBA's Y2K project manager Ken Pritchard, as an example, Scrimshaw said the bank's approach to cross-organisational collaboration is very much a case of chiefs and indians.
"[Ken Pritchard] is a business Y2K product manager. It's his job to interface between the bank and EDS that is physically doing the work. His job is to ensure that all areas of the bank are bringing forward their requirements. He's effectively the bank's owner of Y2K but EDS, however, have all the doers who are doing all the remedial work."