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Deutsche wants Amazon and Google to improve its technology

Deutsche Bank wants to give its technology systems a “makeover”.  Bernd Leukert, according to a company statement, has started a tender process with “several cloud providers”, apparently including all of the Big Three – Amazon, Google and Microsoft.  All three tech giants have been in Frankfurt since last week, coming up with proposals for a marathon series of pitches and negotiations that is scheduled to last as long as three months.  The rules for this particular beauty contest were agreed between Mr Leukert and top-level tech executives in Davos earlier this year.

The length of the process illustrates exactly how big the contract is.  Deutsche’s supervisory board have signed off on €13bn of investment between now and 2022.  By way of scale, if Bernd Leukert had simply brought in his old colleagues from SAP and given them the business, then this one contract would account for a bit more than 10% of SAP’s global revenue over the next three years.  Although it’s unlikely that any one company will scoop the pool in this way, it’s highly likely that the cost of migrating Deutsche’s systems to anyone’s cloud will be in the multiples of billions of dollars, which is enough money to make a difference even to the very biggest players.

Not only that, but the cloud company that takes this on will have the opportunity to develop some serious credentials.  Deutsche’s technology problems are legendary in the industry – they are the result of decades of mergers and underinvestment – and they have seen off several COOs and CEOs who promised to do something about them.  They even have their own folk stories; there is apparently (possibly apocryphally) a set of retail customers whose account balances are entered into savings books by a particular type of printer for which spare parts are no longer manufactured.  The cloud provider that tidies all this up into a single, flexible functional system will be well positioned to win other financial services business, just like Accenture managed to dominate the space twenty years ago on the basis of the “Partenon” architecture it built for Santander.

The big tech firms are well aware of this.  Thomas Kurian of Google Cloud is using sporting comeback metaphors to describe his ambitions to catch up with AWS (who recently became Goldman Sachs’ partner of choice) and Microsoft Azure (who recently landed Lloyds Banking Group).  Google currently lacks a big banking anchor tenant, although it does have a new partnership with Temenos, a big name in banking software.

In other words, this is the ultimate high-stakes battle, because realistically there can only be one main provider of cloud systems to Deutsche Bank.  So the pitching process is likely to make the Saudi Aramco IPO look like a handshake after a relaxing lunch.  At the end of it, we’d imagine that both the bankers and the techies will be in sore need of a pedicure, a solarium and a makeover themselves. 

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AUTORDaniel Davies

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