TD outsources ABMs to HP Canada for $420 million

TD Bank Financial Group says it will be able to offer complete ABM access to the disabled as well as a slew of enhanced features to more than 10 million users within about two years through a $420 million deal with HP Canada.

The two firms said the seven-year outsourcing contract announced Tuesday will include upgrading approximately 2,400 TD Green Machines across the country and point of sale (POS) transaction systems. The back-end switching architecture will continue to run on HP’s ProLiant server technology and NonStop NSK switch hardware. The agreement covers help desk, integrated management and data centre operations. About 50 of the bank’s employees will move to HP.

TD’s Green Machine network is a hybrid of several terminals, predominantly Diebold with some Wincor Nixdorf and a few NCR products. Although the oldest equipment is only about five years old — much of it was replaced or upgraded following TD’s merger with Canada Trust in 1999 — compliance issues forced bank to seek out an outsourcing partner about two years ago, according to TD vice-president Chuck Hounsell.

“”It’s not ancient by any stretch of the imagination, and some of it is as new as deployed last year,”” he said. “”But with all these standards, a lot of these machines need to be either replaced or substantially upgraded.””

Part of the structure of the deal, Hounsell said, is to facilitate an opportunity for other financial institutions or switching partners (banks that operate on the same ABM network) to examine the fruits of HP’s work and see if they could benefit from it. These might include transportation firms that deliver cash and repair bank machines, for example.

Laurentian Bank, ATB Financial and other banks have already signed long-term outsourcing agreements for their ABM networks with HP services rival IBM Canada. In some cases, these deals involve upgrades that will allow banks to advertise services within specific demographics by identifying profile characteristics once they enter their personal identification number. Hounsell said he could see the benefit of creating a button that allows a user to withdraw a preferred amount of cash based on past transactions, but he drew the line at turning ABMs into marketing machines.

“”We do think the opportunity to message our customers individually is important, and in fact tailor services,”” he said. “”Do we see it as an advertising portal that we intend to sell to or spend a lot of money trying to market while they complete a transaction? Probably we’ll do very little of that.””

Leslie Rosenblood, an analyst with research firm IDC Canada in Toronto, said it made sense for many financial institutions to outsource the upkeep of their ABM network.

“”From the HP perspective, you get the incremental revenue and you get to grow a business,”” he said. “”From the bank’s perspective, they can get access to a lot of current technology that doesn’t exist yet, and they’ll get it on their network over the course of the next seven years.””

HP Canada president Paul Tsaparis said the partnership would demonstrate considerable opportunities for consolidation in ABM platforms because of the economies of scale.

“”The more that you can put on a common infrastructure, the lower cost you can provide,”” he said. “”When you think about all the potentially billions of transactions that are out there in aggregate, that can made a big difference. Not only to the financial institution, but to the customers they’re serving.””

HP has been trying to grow its services business while dealing with the fallout from a 10-year-old federal government contact it inherited following its merger with Compaq Canada. In May, HP agreed to pay the government $146 million to settle a dispute over a Department of National Defence contract. Hounsell said he was unfazed by the scandal.

“”We read the papers too, and we actually had frank discussions with HP so we could understand their side,”” he said. “”That’s a whole different set of relationships with what we’re doing here.””

Besides Diebold, HP will be partnering with ACI Worldwide for the core switching solution and application development services, Phoenix Interactive Design for middleware and Intria Items for cash management and forecasting services.

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