Mahesh Sharma | February 05, 2009
update NATIONAL Australia Bank looks set to cut ties with Satyam Computer Services, with bank executives today deciding to cancel the second phase of a massive outsourcing project contracted to the troubled IT services firm.
NAB technology services general manager Craig Bright said the bank would be exposed to too much risk if it continued with the second wave of its IT outsourcing (ITO) strategy, which was given the green light last November.
NAB announced the decision in separate briefings to its staff and Satyam employees at Melbourne’s Telstra Dome this morning, sources close to the company said.
However according to a NAB spokesperson, Wave 2 has been suspended and not cancelled. No timeline was provided.
"It has been decided that application development and maintenance work transitioned to Satyam in 2007 and 2008 will remain unchanged. However, until the longer term future of Satyam becomes clearer, NAB will suspend all work currently in the early stages of transition to Satyam. This work will continue to be carried out by NAB employees.
"As the longer term future of Satyam becomes clearer in the coming months, NAB will consider whether to continue to transition this work to Satyam or another offshore supplier," the spokesperson said.
NAB's objective is to ensure customer service and business continuity are maintained at all times, they said.
"Satyam is now in a period of stabilisation and continues to meet service level commitments and contractual obligations."
The bank already retrenched about 50 employees, primarily contractors, as part of the early stages of ITO Wave 2, and had previously scheduled another round of redundancies in March.
The bank said it will not sever the ITO Wave 1 outsourcing arrangement with Satyam which is offering support and maintenance of key technology functions.
However, it’s understood that NAB executives are considering ways to stop dealing with Satyam altogether, and either bring the technology functions back in-house or outsource them to another firm.
While it would take between three and five months to bring the components back onshore, NAB will need to find the internal resources to support the work as it has already retrenched hundreds of permanent and contractor staff that were responsible for the functions.
The second tranche of technology outsourcing includes the management of Siebel, payments and account services applications.
The Australian recently reported that NAB encountered a number of problems transitioning technology functions to Satyam in the early stages of the outsourcing program’s life.
At the meeting today the bank did not outline back-up proposals following the decision to drop Satyam. NAB chief information officer Michelle Tredenick has previously told staff the bank had several contingency plans to deal with situation.
NAB’s ITO strategy - spearheaded by Ms Tredenick - is part of the bank’s upgrade of its technology systems and processes, which also includes spending $1 billion over five years to replace its core banking systems.
Satyam’s chairman and founder B. Ramalinga Raju and other senior executives were arrested after he admitted inflating the company’s books by more than $US1 billion. Two partners from the company's auditing firm, PricewaterhouseCoopers, have also been arrested.
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