ABN Amro Bank plans to outsource 2,300 IT jobs later this year in a continuing effort to cut costs, according to insiders familiar with the bank's plans.
ABN spokesman Sierk Nawijn confirmed this week that the bank is negotiating several outsourcing contracts but declined to say how many of its 3,500 IT workers will be affected by the moves. Nawijn did say that some of the affected employees will transfer to the outsourcing firms, he said.
The company's IT workforce has already been cut by 1,500 through recent layoff actions, bringing the total jobs cut to 3,500. Insiders expect Amro to employ about 1,200 IT workers after the outsourcing contracts are signed this fall.
The planned workforce reduction is part of a plan to save more than US$1 billion annually. ABN Amro employs 97,000 people in 3,000 branches around the world.
Nawijn said ABN is negotiating with several firms for multiple outsourcing contracts.
The bank had been negotiating with both Hewlett-Packard and IBM about an outsourcing deal to handle its IT infrastructure, but now it's talking only to IBM about that pact.
Nawijn said the bank is in negotiations with Accenture, IBM and Indian companies Infosys Technologies, Patni Computer Systems and Tata Consultancy Services (TCS) about a deal for a contract to handle its application development operations. The bank is also in talks with Infosys and TCS about outsourcing its application maintenance operations, he said.
All of the deals are expected to be in place around September. "The rationale behind this is cost effectiveness, operational efficiency and flexibility," Nawijn said.
Larry Tabb, an analyst at The Tabb Group, said banks and investment firms are under tremendous cost pressure and need to rethink how they run their operations. Companies are looking to outsourcing to cut costs and "to refocus their internal organizations as to what they think is core competence versus noncompetitive and undifferentiating technologies," Tabb said.
Tabb said many of the large financial firms have substantial relationships with outsourcers.
"It's just kind of the way firms are progressing," he said. "It's not as easy as saying, 'OK, starting tomorrow this whole group is going to go to India, or to Russia, or to China, or to Singapore.' But they're experimenting with how they do this and how they do it effectively."
If done right, outsourcing can reduce a company's costs and enable the people remaining at the organization to focus on high-priority projects and the things that make a difference to the bottom line, Tabb said.