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Author: Katharina Grimme
Finanz IT, the captive IT provider of German savings banks, announced yesterday that it plans to cut costs by €100m until 2008. This could mean up to 600 job cuts (more than 20% of the workforce). Finanz IT has a workforce of 2,744 (in four locations) and generated revenues of €723m in 2005. Job transfers to low-cost countries are not on the agenda.
Finanz IT is the result of a merger of the IT divisions of several savings banks, and now provides data centre operations for some 160 savings banks, five state banks (Landesbanken) and five building societies (Landesbausparkassen).
Comment: This is a necessary step to remain competitive. But it illustrates once more the pressure that captive IT companies are facing. The other two IT service providers to German savings banks, IZB Soft and Sparkassen Informatik, are currently negotiating a merger.
For Finanz IT, which serves banks with standardisation and centralisation of data centre operations, it raises the question if these types of services could not be better (and cheaper) provided by a professional IT services company that has more extensive expertise and can maximise scale economies.
We believe that sooner or later this captive, too, will be sold off - IT infrastructure provision is not a core competence for a bank, and the German savings banks themselves are under fierce competitive pressure and are consolidating. Maybe the current cost-cutting exercise is simply a first step to make the company more attractive to potential buyers?
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