The National Bank of Canada has extended its outsourcing agreement with IBM Global Services for a decade through a $1.1 billion contract announced Wednesday.

IBM Global has been providing IT services like infrastructure management and call centre operation to the Montreal-based bank since 1994, but will become more involved in the bank’s ongoing e-business initiatives through the new contract.

“Most of our (outsourcing) customers that have been with us for a while have asked us to really become much more creative and take more of a business leadership role in their accounts,” said general manager of IBM Global Services Canada, Rick Horton. “This is one of the areas that they’ve asked us to put together.”

National Bank’s e-business plans include improvements to its customer-based sites, both retail and commercial, said Michel Labonté, the bank’s senior vice-president of finance and control.

Another major initiative includes further development on the bank’s business-to-business e-marketplace, Clic Commerce. The venture, first announced a year ago, is a collaboration between the National Bank and Montreal solutions provider Cognicase. The bank started signing up small and medium-sized clients in October, said Labonté.

“We must play a role in getting small and medium-sized businesses, which is one of our core customer bases. (They need to be) Internet savvy — not only in promoting their products, but being able to sell or buy through the Internet and using Internet banking,” he said.

National Bank stands to save $5 to $10 million annually through its outsourcing agreement, added Labonté, but will maintain its own skeleton crew of IT staff. “Obviously it’s minimal, but it’s the minimum amount of staff required to be an informed owner and have control of the key decisions that in the long run affect your cost structure,” he said.

Internal IT staff will continue to manage some key operations, such as high-end security and project management because “most of the time there are at least two if not three outsourcers involved in delivering a project,” Labonté said. Cognicase is performing maintenance and development of applications and Bell Canada is managing the bank’s telecom network.

Outsourcing is a growing revenue stream for IBM, said Horton, accounting for about 40 per cent of its business. “If you take a look at an $80 billion company, it’s a huge chunk of our revenue stream. That’s basically been the result of our customers saying that the IT portion of their businesses are becoming far more complex to manage,” he said.

The world’s largest consulting company signed a seven-year outsourcing agreement with Scotiabank earlier this year for $900 million. “They’re looking for similar assistance in transforming themselves into an e-business,” said Horton.

Labonté anticipates the National Bank’s relationship with IBM Global will include rollout of wireless and portable banking services in the coming years — both for staff and customers.

“If you look down the road five years, I think even some of our frontline employees, instead of keying in on the fixed desk, could be keying in on something wireless and closer to a Palm Pilot than a huge PC,” he said.

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