TCS to add Deutsche Bank division in first German acquisition
Tata Consultancy Services is poised to make its acquisition in Germany and its largest ever move in continental Europe, with the purchase of the Postbank Systems unit of Deutsche Bank.
The price of the deal has not been disclosed, but TCS will take on 1,500 employees through the move, which will close by the end of the year, subject to state and regulatory approval. The size of the target business is slightly bigger than previous continental purchases, Alti (the French services business acquired in 2013) and TKS-Teknosoft (a Swiss banking specialist purchased back in 2006).
Deutsche Bank bought the Postbank business back in 2010, and at the time, the latter ranked as the country’s largest commercial retail bank. Postbank was intended to strengthen the retail banking part of Deutsche Bank and to compete with Sparkasse (German saving banks) and Volks-und Raiffeisenbanken (mutual banks). That worked well for a while, and at a time when Deutsche Bank's investment banking was in crisis, Deutsche Postbank helped to stabilize the group. But overall, Deutsche Bank has never been really happy with Postbank and took the decision last year to integrate it into other group operations.
However, Deutsche Bank has had very bad experiences with IT integration: The integration of Postbank-IT and Deutsche Bank IT failed a few years ago, costing several hundred million euros (Magellan project - a joint SAP solution was planned as core banking solution). Since then there have been no more significant attempts at harmonization.
Deutsche Bank is undertaking a major overhaul of its tech strategy in 2020, under the direction of Bernd Leukert, the former SAP executive who joined as group Chief Technology, Data and Innovation officer last year. Leukert is playing a key role in driving a €13bn overhaul of the bank’s environment, which he has described as overly complex and lacking in consistency. Deutsche Bank entered into a major cloud partnership with Google earlier this year, and as part of the deal with TCS, the vendor will be tasked with supporting the consolidation of Postbank onto the Deutsche Bank IT platform. TCS will take over the legacy back office and core banking systems from Postbank, including infrastructure operation, application management and development, which will be retired in the coming years. There is no transfer of infrastructure assets as part of the engagement, and it does not overlap with Atos' existing deal to manage the decentralized IT infrastructure.
The acquisition of Postbank Systems will further consolidate TCS’ position as one of the largest players in the German IT services market, and almost double its number of staff in the country. Our latest rankings place TCS inside the top 20 IT services providers in the country, but the addition of Postbank Systems would put it well on course to break into the top ten. It will also give it a strong platform on which to pursue opportunities with German savings and mutual banking companies.
Even without any acquisitions, TCS’ growth in Germany has been consistently strong for some time, primarily driven by its applications services and BPO activities, but also in the area of infrastructure services. The company has a very strong localization strategy in Germany, with the company’s focus in the country centred around the banking and manufacturing sectors.
Deutsche Bank’s move is also illustrative of the wider trend that we are starting to see of organizations look to get assets of their books and work with external partners in broad-scope deals to deliver transformation and cost efficiency at speed. The bank said that the deal with TCS would help it to accelerate the expected €120m cost savings benefits it expects to achieve through its transformation plan. We expect many similar moves in the coming months as European businesses look to build their foundations to support their post-Covid strategies.