Magazine article American Banker

Pending EDS-ABN Deal Sign of a Tech Turnaround?

Magazine article American Banker

Pending EDS-ABN Deal Sign of a Tech Turnaround?

Article excerpt

In what may be a sign that the long slide in technology spending is ending, ABN Amro Holding NV and Electronic Data Systems Corp. have confirmed that they are negotiating a five-year outsourcing contract worth $1.5 billion or more.

An EDS executive said the contract would rank among the largest information technology agreements in the history of banking, and among this year's biggest IT deals.

The Plano, Tex., data processor said it had entered into exclusive final discussions with the Dutch financial giant after prevailing over other firms.

In an interview Thursday, Coley Clark, the senior vice president at EDS who oversees its global financial industry group, said he could not discuss details of the plan while negotiations continued. But he did address more generally the subject of banks' technology spending.

"I think the pipeline is larger than it's ever been," Mr. Clark said. "The deals are bigger. Larger and larger institutions are evaluating outsourcing." Companies are looking anew at their IT operations, trying to get the best results from their technology spending while controlling costs, he said. As a result, projects are "larger and more complicated, and they take longer to evaluate."

Despite the difficulties in the broader IT market, EDS has been scoring new contracts with major financial institutions, Mr. Clark said. It has announced deals this year with Deutsche Bank, Bank of Queensland in Australia, and Bank Leumi in Israel. Still, Mr. Clark predicted that technology spending on the whole "is going to be flat for another year or so."

Rod Bourgeois, an analyst at Sanford C. Bernstein & Co., called the pending ABN Amro-EDS deal a "megacontract" and "a boost to the outsourcing industry," though he said it would have more impact in Europe than in the United States.

Mr. …

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