ABN AMRO carve-up: the IT implications

The business pages over the weekend featured coverage of the merger talks between Barclays and ABN AMRO. Whether or not Barclays succeeds, the pressure from hedge fund investors and the number of other suitors interested in parts of the Dutch bank’s global business means that a break-up of the group is increasingly likely, though not certain.

But carving off its Asian, South American or US operations, or particular business units such as investment banking, won’t be as easy today as it would have been before 2005. Before this, geographies and business units were much more discreet and siloed operationally. Now, like many banks seeking to improve operational efficiency, it has centralised and consolidated many IT operations and processes across its geographies and business units to make the group much more cohesive.

ABN AMRO’s current organisational structure more or less dates from the start of 2006. This includes a Services IT organisation that handles group-wide technology services, and manages vendor relationships and the business units’ requirements.

The bank had been pursuing a group shared services strategy for several years leading up to the restructure, and this culminated in a programme of in-house consolidation, partial outsourcing and multi-vendor offshoring. In 2005, ABN AMRO signed global service agreements valued at approximately EUR 1.8 billion over a five-year period with five vendors. These include outsourcing IT infrastructure to IBM, and application support and enhancements to  Infosys and Tata Consultancy Services (TCS). Five preferred suppliers were also appointed for application development: Accenture, IBM, Infosys, Patni and TCS.

Any potential suitors for parts of ABN AMRO’s business will have to factor into their due diligence the effort required to unwind these outsourcing arrangements and separate grouped IT infrastructure.