CIBC turns over IT to HP in $2 billion outsourcing deal

The Canadian Imperial Bank of Commerce Tuesday said it has outsourced almost everything but the vault door to HP‘s services group in a seven-year deal worth more than $2 billion.

In a separate but not unrelated deal, the two companies also said HP will buy out CIBC’s share in Intria-HP, a joint outsourcing service company formed in 1998.

Mike Woeller, CIBC’s chief information officer, said he expects HP to provide a reliable, secure and adaptive IT infrastructure for the bank’s employees, suppliers, partners and close to eight million customers.

“”The outsourcing agreement will free significant CIBC capital and management time from its non-core banking business,”” Woeller said. “”HP will maintain the risk exposure on behalf of the bank and offer a single point of accountability for the services provided under the agreement.””

According HP Services executive vice-president Ann Livermore, CIBC is HP’s largest managed services client and the firm will be responsible for everything from PCs and mission-critical systems to software and IT governance. Though much of the infrastructure won’t have HP roots, Livermore said she isn’t concerned. Almost 1,300 IT employees will move from CIBC to HP Services.

“”This move is a natural evolution for both of our companies and it certainly gives HP a great opportunity because we’re acquiring some really top-notch IT services skills and resources,”” Livermore said.

“”It’s a very, very large deal and it clearly demonstrates our commitment and our capabilities as a top tier services company.”” The agreement also marks the largest services deal for HP since its merger with Compaq, Livermore added, and the largest in its history. Services account for a little less than 20 per cent of HP’s post-merger revenue.

Livermore said the acquisition of Intria — which services customers like General Motors and Halliburton — and its data centre should also open doors. “”It’s a really nice location in terms of the environment. We have a low-cost operations environment and then, on top of that, a phenomenal hiring pool in the Toronto marketplace in terms of the quality of the IT staff and professionals.””

Woeller said the deal evolved out of the prior working relationship with Intria. While it considered issuing a request for proposal, the bank also chose HP after consulting some benchmarking services companies.

IDC Canada analyst Jason Bremner said he doesn’t expect the integration of the CIBC staff to pose any significant challenges, despite the fact HP is still trying to process the influx of Compaq staff.

“”Recall that this organization (Intria) has been somewhat autonomous,”” Bremner said. “”It’s been a round for a few years now, and they’ve been working very closely with HP throughout that time. I think they’ve got the game plan to how integrate pretty seamlessly.””

Though its services business is growing by leaps and bounds, Livermore said it doesn’t view itself as IBM Global Services 2.0.

“”We feel that we’re coming to market with a different focus than IBM,”” she said. “”While IBM has more of a focus on doing everything themselves, we believe the best answer for our customers is to team with the industry leaders.””

Bremner said there’s no danger of the two being confused: Big Blue is much, much larger, as are EDS and CGI.

“”This 1,300 people would comprise a big portion of the new HP’s outsourcing business in Canada in terms of employees,”” he said.

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