Westpac, IBM take top IT outsourcing gong

Westpac and IBM have been awarded a prize for the 'best sourcing relationship in IT outsourcing', despite their last contract leaving the bank with an IT repair bill of hundreds of millions of dollars.

The firms received the Paragon award on March 29 at an event hosted by IT advisory firm Information Services Group (ISG).

Westpac extended a decade-long infrastructure outsourcing arrangement with IBM for an additional five years in December 2010. The renewal came despite former Westpac group technology executive Bob McKinnon describing the relationship with IBM leading up to the deal as "dysfunctional".

McKinnon has since said the bank accepted its share of blame for what went wrong under the IBM relationship. The bank now takes "greater accountability in the design and management of IT services" and has spent half a billion dollars over four years to put things right.

'Modern agreement'

Award judge Don Easter told iTnews that it was this renewal and transformation of the relationship that enabled Westpac and IBM to edge out other finalists.

"IBM recognised that they had to change and they did," Easter said.

"Given that's a ten-year relationship - the old relationship was well and truly out of date," he said. "They had to reconstitute the whole relationship and they took time to sit down and develop values around how they'd work together and way they'd communicate.

"The feedback generally from Westpac, IBM and the industry generally is that they are following that."

Easter said the two organisations were now "acting like one team.

"They're getting results now," he said. "There's been a marked change in performance."

Easter believed the Westpac-IBM turnaround would become a model for other IT outsourcers. He urged services firms to "look at your client's business strategy, look at what they're trying to give to their clients, and align yourself to deliver it." 

The sheer scale of the IBM/Westpac relationship also played a part in the decision, he said. Easter positioned Westpac and IBM as "heavyweights" - the former boasting "experienced, world-class executives" and the latter being the "number one company" in the world.

"There's only three [IBM] accounts in Australia that [IBM chairman] Sam Palmisano would care about. Westpac would be one of the top 25 accounts in the world, I reckon," he said.

He said he expected service providers as large as IBM to adjust their delivery to suit clients in future.

" I think that will become a bit of a benchmark for future contracts," he said. "[IBM-Westpac is] a very modern agreement and so I wanted to recognise that."

Beats HP, Centrelink deals

The IBM-Westpac relationship trumped several other large-scale outsourcing deals to the award.

HP and the Australian Tax Office had been named contenders for their $500m centralised computing services arrangement. HP beat IBM to secure that deal.

A further contender was the Department of Veterans Affairs' migration onto Centrelink infrastructure. DVA had previously outsourced that work to IBM for 13 years.

Capgemini and the Councils Online project was also up for the award. Much of the groundwork for Councils Online was laid several years ago.