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Lloyds Bank outsources its cloud business and 1,500 staff to IBM

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June 6, 2017

We just learned that Lloyds Bank has agreed to a 10-year outsourcing deal of its infrastructure with IBM, along with 1,500 of its staff to be transfered over to Big Blue.

For more than a decade, IBM has been in the business of acquiring thousands of IT workers from its own enterprise customers and moving over their whole cloud business into its own infrastructure. That way, IBM inherits a lot of new and very experienced workers, and not just the business side of the transaction. It's a smart and efficient way of getting new business at a lower overall cost.

That's a practice that was originally initiated by Louis Gerstner, its CEO that turned around IBM and saved it from potential bankruptcy in the mid-90s up to 2002.

The bank had been negotiating with IBM to outsource the management of its various cloud services to Big Blue for several months.

Those talks concluded today, with Lloyds announcing to its staff that it has signed one of the largest cloud outsourcing deals within the financial segment.

The shift to IBM's infrastructure could take up to three years before it's completed. There's a good chance that other large banks could follow in Lloyds' footsteps before the year is over, industry experts are predicting.

"Most work colleagues busy in the Infrastructure Technology Services department supporting these systems and delivering change will transition to IBM, with a number retained in Lloyds Banking Group to manage the relationship, service and governance of IBM," said an internal memo.

As a result, around 500 staff will transfer to IBM on September 1st, 2017. About 1,000 contractors who currently support Lloyds Banking Group will also move to IBM's banking support department.

The various teams that are earmarked to transit over to IBM are those working with Linux, Windows X86, UNIX and IBM's iSeries servers.

Lloyds asserted that it will maintain a substantial retained organization in its Group IT function to provide various services, manage the cloud transformation and help deliver the benefits over the coming years as part of our transformation partnership.

Morteza Mahjour, group CIO, said the agreement will allow the bank to become highly scalable and provide up to date technology on demand.

He addeed-- "As customer demands change and innovation in the industry gathers pace, having a more modern and agile technology platform will help us lay the foundations for the next phase of our strategy.”

However, Lloyds asserted at the same time that various controls and mitigation plans have been established to offset the risks of outsourcing everything to IBM's private cloud.

Lloyds' Dominic Hook added that the company's union was seeking urgent reassurance from IBM and Lloyds Banking Group about the long term job security of the 1,500 IT staff.

He added: ''This announcement will leave staff nervous about their future and angry about the loss of their final pension benefits. The key concern for our staff right now is that they get assurances about what this change will mean following the transition period and that there will be no changes to their salary and terms and conditions.''

Source: Lloyds Bank.


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