The Bank of Bermuda announced yesterday that its board of directors have approved the outsourcing of IT applications, infrastructure and capital projects management to EDS Corp and Cable and Wireless.

EDS will become the bank's strategic IT services partner for the next 12 years.

Some 290 staff currently employed in the bank's IT department will cease working for the bank and transfer to a new company being set up by EDS Corp in Bermuda.

The bank's chief operating officer Phil Butterfield said: "The good news is that they are going to be co-located with us in their present offices so we expect the working relationships will remain essentially the same."

Current head of IT, Mike Ebbs, will remain at the bank as head of a smaller IT division of about 13 staff.

Texas-based EDS Corp is a major global player in deploying technology for financial institutions.

Originally founded by Ross Perot, it was sold in 1987 to General Motors for $2.4 billion who later divested their interest.

The EDS company web site says that more than 10,000 EDS employees work on finance-related projects in 29 countries for such customers as Lloyds, Royal Bank of Scotland and Deutsche Bank.

In 2001, EDS reported revenues of $21.5 billion. The company's stock jumped 11 percent on the news of the Bank of Bermuda deal. Investors had been uneasy about EDS' ability to land "mega-deals" since the company lost out on two recent contracts - with Proctor & Gamble Co. and J. P. Morgan Chase & Co.

Mr. Butterfield said that the development had several positive implications:

"It's good for the bank because it partners us with a global technology enterprise and accelerates the transition to deliver technology services more efficiently for our clients."

For those bank employees who will be transferring to the EDS company, he said: "The door has now been opened for exciting opportunities in terms of personal and professional development. For example EDS has 700 online education programmes. There will be opportunities to work in other sectors and in other geographic locations."

Expatriate employees of the Bank's IT department will also be able to work for the EDS company and a bank spokesperson said: "We have worked closely with government to ensure that there will be a smooth transition for all staff affected."

Asked whether the Bermuda EDS operation will be able to consult for other local businesses, Mr. Butterfield said: "We bring to the Island with this partnership a global player and although they will be initially focused on Bank of Bermuda, in time it is highly probably that they will find opportunities to add to the community."

As for whether the EDS group might redomicile in Bermuda, Mr Butterfield said: "The expectation is that there will be positive knock-on from this."

The proposed 12-year contract with EDS is estimated to be worth $375 million and the proposed five-year contract with C&W is worth approximately $20 million. The bank expects negotiations with EDS and Cable & Wireless will conclude in the new year.