INDIA’S top two software exporters TCS and Infosys can gain from the merger between Westpac Banking Corp and St George Bank in Australia, as Westpac is planning to spend nearly $338 million on integrating the information technology systems, and is also evaluating an outsourcing contract worth between $100-200 million (up to Rs 1,000 crore).
“In the past, Westpac did consider offshoring, but it had to be called off after a massive public outcry against outsourcing of local jobs. However, there is a convincing case for offshoring this time around, which is being considered by the bank,” said a consultant who requested anonymity. “The bank had evaluated Infosys’ Finacle before this merger happened,” he added.
The Australian banking industry, with potential customers such as Westpac, National Australia Bank (NAB), Commonwealth Bank of Australia and ANZ, will invest almost $4 billion on technology this year, according to the industry experts.
“Australia has at times been a prominent purchaser of technology and IT Services, they are somewhat linked to China, and in this environment all clients are important,” said James Friedman, analyst with Susquehanna International Group (SIG).
Apart from outsourcing its IT application development and maintenance
activities, Westpac is also seeking to replace its existing core banking system, another expert told ET on conditions of anonymity. While both TCS and Infosys are discussing the Westpac opportunity, none of the companies could offer any comments when contacted by ET.
TCS, which acquired the Sydney-based core banking software company Financial Network Services (FNS) three years ago can gain from the integration because St George Bank already runs FNS system. “Westpac, which uses a two-decade-old core banking system, has been evaluating an upgrade. With St George already running FNS, there is an opportunity for TCS,” the expert said.
Infosys, which works with leading Australian firms such as Rio Tinto and Telstra, is currently exploring the opportunities for its core banking solution Finacle, apart from an outsourcing contract for managing the integration. Infosys could not offer comments. Westpac currently has a ten-year outsourcing contract with IBM, due to expire in 2010, but the bank is seeking to revisit its outsourcing strategy after the merger.
“Westpac is being advised by Booze Allen Hamilton and McKinsey on restructuring of operational and IT systems, and outsourcing of activities such as back-office work, application maintenance and development is a part of the exercise,” the expert added.
Westpac’s had attempted a core banking replacement even during late 1980s, but had to write off almost $400 million after the project failed. “Westpac will be a lot more cautious this time,” another person familiar with the Australian banking system told ET.
In a presentation earlier this month, Westpac’s group chief transformation officer Brad Cooper explained the bank’s strategy for integrating the IT systems. According to him, the IT integration costs alone will be around $338 million, apart from an additional $168 million being earmarked towards outsourcing and restructuring. Mr Cooper also added that an IT strategy will be completed by March next year.
These initiatives are expected to help Australian bank achieve cost synergies of over $400 million by 2011, of which nearly 60% will come from outsourcing and restructuring projects. Westpac officials could not respond to an email query sent by ET on Monday.
Australian enterprises are not as severely impacted by the global economic recession when compared to their rivals in the US and Europe.
BANKING BIG
• Westpac Banking Corp, after the merger with St George Bank is planning to spend nearly $338 million on integrating the information technology systems
• It is also evaluating an outsourcing contract worth between $100-200 million
• Infosys, which works with leading Australian firms such as Rio Tinto and Telstra, is currently exploring the opportunities for its core banking solution Finacle
• With St George already running FNS system of TCS , there is an opportunity for the Tata company
