UPDATE: IBM confirms $1.6B 'outsourcing' deal with Lloyds Bank

UPDATE: IBM confirmed it has signed a 10-year agreement with U.K.-based Lloyds Banking Group to provide cloud services, the company announced last week. Big Blue will provide both dedicated hosting on cloud data centers in the U.K. and will also manage application migration services. The cloud transition is expected to take three years, The Register reports

As reported on March 17, employees in Lloyd's infrastructure technology group supporting systems will transition over to IBM. But staff that supports the relationship, service and governance of IBM will remain at Lloyds, according to The Register. The goal is to allow the bank to offer scalable and up-to-date technology on demand. 

The confirmation of the deal comes just after reports surfaced that Facebook's WhatsApp plans to move its infrastructure in-house, moving off IBM cloud. That's a blow to Big Blue's cloud business, as the messaging app runs on more than 700 IBM servers. At one time, Facebook was spending as much as $2 million per month on IBM cloud. 

Dive Brief:

  • U.K.-based Lloyds Banking Group plans to move almost 2,000 staff members to IBM as part of a £1.3 ($1.59) billion, seven year IT outsourcing deal, the Lloyds Trade Union announced this week. 
  • Staff will be outsourced to IBM, and then over a four-year period the work will be "offshored," The Stack reports. Though 1,961 staff members — including permanent staff, third parties and contractors — will transfer to IBM, after four years, just 193 staff members will remain working on the Lloyds contract. 
  • Through the deal, Lloyds is looking to save £760 ($938) million in costs, make IT more agile and streamline the business, according to The Stack.

Dive Insight:

Earlier this year Lloyds suffered a distributed denial of service (DDoS) attack that caused the bank to shut down for two days. Though the bank said no accounts were compromised, it was certainly a wake-up call. Cyberattacks are a huge risk to the finance industry, and concerns have been growing significantly in the wake of attacks and near-misses. 

The deal will start by outsourcing staff to IBM, in what is basically an "as a Service" model. Outsourcing IT labor no longer means companies are simply going to bring in foreign labor to do technology work at a cheaper rater.

Rather the outsourcing model is being turned on its head as companies rely on as a Service models, creating an entire spectrum of outsourcing. On one end, it's labor arbitrage. On the other end, it's a software or infrastructure-driven model that is far more sustainable and profitable. In this case, relying on IBM's networks with its vast pool of resources can also increase security and systems reliability. 

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Filed Under: IT Strategy Security Infrastructure