Several large vendor contracts have been renewed recently in the Australian banking sector. They have followed a similar theme with some very public dialogue about the banks wanting to reduce their IT spend e.g. joint buying initiatives, open standards and cloud computing aimed at reducing server hardware costs.

The outcomes of the contract rounds have favoured the ‘status quo’ though because switching vendors is hard. The terms of the new contracts have improved and show a reasonable compromise has been reached that provide for reduced lock in e.g. Westpac’s contract duration has reduced from 10 years to 5 years and allows the bank some freedom to implement systems using technologies other than that provided by the vendor. This is a win for the banks because they retain the expertise of the vendor, but gain some bargaining power over how systems are to be built.

For IT Professionals the perspective is particularly satisfying because these latest contract outcomes show that IT best practices like open standards are being embraced at the top of large organisations because they promise real benefits of reduced costs.