Deutsche Bank Hires IBM In $2.5 Billion Outsourcing Deal

In the deal, expected to begin in the first quarter of 2003, Deutsche Bank will transfer its European computer data centers and technology workers to IBM, which will provide the bank with computing power and services.

Frankfurt, Germany-based Deutsche Bank expects to save around $1 billion over 10 years, said Hermann-Josef Lamberti, the bank's chief operating officer.

Under the contract, Armonk, N.Y.-based IBM will consolidate Deutsche Bank computer centers in Belgium, Germany, Italy, Poland, Portugal, Switzerland, Spain and Luxembourg into a central data center in Germany's Rhine-Main region, the companies said.

Outsourcing of companies' entire information technology departments has grown into a trend in recent years, with IBM, Electronic Data Systems Corp., Hewlett-Packard Co., Computer Sciences Corp. and others winning multiyear deals that run into the billions.

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In February, IBM announced that American Express Co. would pay more than $4 billion to run its information technology operations for seven years, while transferring 2,000 employees to Big Blue.

IBM is now in the midst of negotiations over an outsourcing contract with J.P. Morgan Chase and Co. expected to be worth more than $5 billion, J.P. Morgan announced last month.

The premise behind such deals is that a technology company is best equipped to own and operate computers. A financial services company or government agency is better off simply buying the computing power and storage it needs, instead of owning and maintaining computers.

A rash of similar outsourcing contracts are expected over the next few quarters, after a half-year dry spell, said Gary Helmig, an analyst with SoundView Technology Partners.

Besides the Deutsche Bank contract, IBM said it has signed an additional $1 billion in IT services contracts in the past month.

"There's been a dearth of bookings for the last several quarters from all companies," Helmig said. "All of them are showing some pickup now."

In trading on the New York Stock Exchange, IBM shares fell $1.18 to close Wednesday at $79.13.

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