BCB pioneers bank IT outsourcing in Malaysia

Malaysia's Bumiputra-Commerce Bank (BCB) has become the first bank in Malaysia to outsource its IT functions, with a US$250 million 10-year contract with Electronic Data Systems (EDS). The contract is also the largest outsourcing deal yet signed in Malaysia, the partners said in a joint statement Wednesday.

EDS will build and manage the technology infrastructure for a new subsidiary that BCB has set up to handle its financial information technology (IT) and back office processing. The subsidiary, known as EPIC-I, expects to save 20 percent of IT costs through economies of scale, new technologies, re-engineered processes and improved staff productivity, according to the statement.

EDS will provide application development and management services; manage the company's mainframe, midrange systems and network; and manage desktop computers and servers.

IT outsourcing by banks in the Asia-Pacific region is becoming more common as liberalized financial environments bring competition from global banks.

In 1997, Australia's Commonwealth Bank signed a A$5 billion (US$2.6 billion) outsourcing contract with EDS. IBM Corp.'s Global Services division has won several bank outsourcing contracts, including Japan's Mitsubishi Trust & Banking Corp., Daiwa Bank, and National Australia Bank.

The problems faced by bank IT departments include updating old legacy applications, developing online banking and even wireless online banking services, and adapting systems to work in a global environment, bank officials in Singapore have stated previously.

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