Bank Outsources Messaging Apps to HP

FRAMINGHAM (07/21/2000) - The Canadian Imperial Bank of Commerce (CIBC) has outsourced its entire messaging infrastructure to Hewlett-Packard Co., offering an endorsement of HP's efforts to expand into the application service provider (ASP) market.

HP will host and manage all mail and messaging services for more than 40,000 CIBC employees worldwide. Toronto-based CIBC is one of North America's largest banks.

CIBC's decision to outsource mission-critical services such as messaging and mail services is indicative of the growing interest in the ASP model, said Mark Levitt, an analyst at International Data Corp. in Framingham, Mass.

"Announcements like these are an important milestone that serves to confirm" the value of ASPs, Levitt said.

The pay-as-you-go arrangement with HP will allow CIBC to simplify its messaging infrastructure and drive down the costs of managing it, said Tom Strong, the bank's chief technology officer.

Previously, there was no reliable way for CIBC to separate - or even accurately estimate - the costs of providing messaging services from other services provided to various business units by the information technology organization.

Under the per-user pricing model offered for HP's Messaging-on-Tap service, CIBC now has a pricing structure that is "nicely predictable and sensible," Strong said. CIBC will save approximately $5 million annually in management costs related to messaging alone, he said.

ASP offerings such as HP's provide a contractual pay-as-you-go application service that customers access remotely.

Unlike traditional outsourcers and hosting services, where the focus is either on handling entire business processes or managing components of the infrastructure, ASPs such as HP focus on hosting and managing applications. And unlike those other services, in which technologies are deployed depending on customer needs, ASPs deliver service from a single common infrastructure.

This provides for better scalability and control over the environment, said Frank Barker, an HP vice president.

For instance, HP's Messaging-on-Tap service was designed to be a one-to-many application service that users such as CIBC subscribe to for a specific period, Barker said.

It was previously believed that such services would primarily appeal to small and midsize businesses trying to get away from the costs involved in buying hardware and licensing application software, Levitt said.

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