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Cisco Systems Capital operating lease gives ABN AMRO’s Wholesale Clients division
INFRASTRUCTUREFORTHEBILLION3AKHALIN)SLANDOILANDGASPROJECT
a superb platform for its trading floors and a new approach to IT investments
h7EHADTOENSURETHATTHEDIFFERENTPARTNERSINTHEUNDERTAKINGINSTALLEDFITFORPURPOSE
“THERE’S A STRATEGIC ASPECT TO THIS LEASING ARRANGEMENT. OTHER PRIORITIES CAN OFTEN CREEP IN AND PUSH
EQUIPMENTWHICHWOULDREMAINTHATWAYTHROUGHOUTTHELIFEOFTHEPROJECT"LEEDINGEDGE
OUT YOUR EXISTING PLANS, WHEREAS THIS APPROACH COMMITS THE BANK TO MAKING CERTAIN STRATEGIC DECISIONS
ANDUNRELIABLEWEREDEFINITELYNOTWORDSTHATAPPEAREDONOURSHOPPINGLISTv
AT THREE AND FIVE-YEAR INTERVALS. THAT IS A HUGE SAFEGUARD TO AN ABSOLUTELY CRITICAL IT RESOURCE.”
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PeterÊÊÊ
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Josse, Global Head ofiÌÜÀÊiÃ}Ê}iiÀ]Ê-
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Telecommunications and Network Services, ABN AMRO Wholesale Clients
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ABN AMRO
INDUSTRY
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Financial services
BUSINESS
CHALLENGE
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ABN AMRO’s Wholesale Clients
division used Cisco Catalyst 5500s in the
ÊÊÌiiVÕV>ÌÃÊvÀ>ÃÌÀÕVÌÕÀiÊÜ>ÃÊ
local area networks that support its
ÊÊÀiµÕÀi`ÊÌÊÃÕ««ÀÌÊÌ
iÊ->
>ÊÃ>`Ê
London and Amsterdam trading floors.
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A rise in business levels meant that an
upgrade was urgently needed to continue
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to ensure efficient
delivery of data to
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-Ê£x{x{Ê"«ÌV>Ê/À>ëÀÌÊ
traders
and
clients.
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ÊÊ
ÃV½ÃÊLiÃÌvLÀii`Ê«À`ÕVÌÃÊ
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ABN AMRO selected a bespoke and
standardised build of Cisco Catalyst
ÊÊ
ÃVÊÜÕ`ÊLiÊ>LiÊÌÊÌÀ>ÃviÀÊÌÃÊÊ
6500 intelligent switches, financed
ÊÊiÝ«iÀÌÃiÊÊ«ÌV>ÊiÌÜÀÊ`iÃ}ÊÌÊÊ
by a three-year operating lease with a
ÊÊÌ
iÀÊVÌÀ>VÌÀð
two-year extension and a built-in
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technology refresh.
s->
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BUSINESS
VALUE
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•ÊÊVÕV>ÌÃÊvÀ>ÃÌÀÕVÌÕÀiÊÜÊÌÊ
The Cisco Systems Capital leasing
ÊÊÞÊ
>ÛiÊ>`iÊ>Ê>ÀÊVÌÀLÕÌÊÌÊ
arrangement means the equipment is off
ÊÊÌ
iÊ>V
iÛiiÌÊvÊÌ
>ÌÊÌ>À}iÌÊLÕÌÊ>ÃÊ
balance sheet which reduces the bank’s
ÊÊÜÊVÌÕiÊÌÊÃÕ««ÀÌÊÌ
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corporation tax bill. ABN AMRO is also
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able to take advantage of the net present
ÊÊvÀÊ>ÞÊÞi>ÀÃÊÌÊVi°Ê
value of the money it is using to fund
the investment. Total savings over the
term of the lease are estimated at 15 to
17 per cent.
NETWORK SOLUTION
ABN
AMRO is a leading international bank that ranks 11th in
2USSIAS3AKHALIN)SLANDLIESATTHEEPICENTREOFTHEWORLDS
Europe
and 20th in the world based on tier 1 capital. When
MULTIBILLIONDOLLARDASHFOROILANDGASRESERVES)NANUNFORGIV
business
growth led its Wholesale Clients division to replace the
INGARCTICCLIMATETHE3HELL4ELECOMMUNICATIONS/RGANISATIONHAS
infrastructure
in its London and Amsterdam trading floors in
HELPEDTHE3AKHALIN%NERGY)NVESTMENT#OMPANYDELIVERAlTFOR
the
middle of a financial year, it needed an innovative and
PURPOSECOMMUNICATIONSINFRASTRUCTURETHATWILLCONTINUETO
cost-effective
financing solution as well as a scalable, resilient and
SUPPORTTHERIGOROUSOPERATINGPROCEDURESDEMANDEDBYLEADING
high-performance
technology upgrade. A Cisco Systems Capital
EDGEOILANDGASPRODUCTION34/CHOSEBESTINCLASSTECHNOLOGY
leasing
arrangement for Cisco Catalyst 6500 switches has resulted
FROM#ISCO3YSTEMSPROVENINCOUNTLESSINDUSTRIALTHEATRESAROUND
in
estimated savings of 15 to 17 per cent over the term of the
THEGLOBE#ISCO3YSTEMSHASALSOLENTITSADVICEANDEXPERTISETO
lease.
The Cisco deal is also aligned with ABN AMRO’s long-term
THEOTHERCONTRACTORSINVOLVEDINTHISBILLIONPROJECT
strategy to manage its technology investments differently in order
to
continue raising standards of business performance.
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BUSINESS
CHALLENGE
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ABN
AMRO’s Wholesale Clients division is one of Europe’s largest
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wholesale
banking businesses, with over €6
billion in revenues. A global
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operation
with 10,000 clients, its largest European trading floors are in
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London
and Amsterdam. Both the wide and local area networks (LANs)
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serving
these centres are Cisco based and, between 1998 and 2004, the
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LANs ran predominantly on Cisco Catalyst 5500 switches.
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Like most investment banks, ABN AMRO had reacted to the economic
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downturn by cutting costs and introducing efficiencies throughout its
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business. In 2003, Wholesale Clients allocated budgets to upgrade its systems
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in 2005. However, this planned investment was unexpectedly brought
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forward by a surge in business activity during the early part of 2004.
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“We saw a considerable growth in the investment banking market in 2004
L>Ê/ÊvÀ>ÃÌÀÕVÌÕÀiÊ>>}iÀ°
which led to increased demands from our traders, particularly around
market data,” explains Peter Josse, Global Head of Telecommunications
-
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and Network Services at ABN AMRO Wholesale Clients.
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The
impact on the network was potentially dangerous, as traders’ use of
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real-time
applications such as the TIBCO-Reuters platform was increasing
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significantly.
The situation was further complicated by the fact that
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Wholesale
Clients delivers content to its traders in a multicast environment,
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making
network traffic profiling and management more difficult.
“The traders expect to receive pricing within milliseconds of those prices
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being
in the market,” Peter Josse continues. “We were suddenly seeing
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unprecedented
demands in terms of network availability and throughput
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of
market data.”
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Cisco
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All contents are Copyright© 2005 Cisco Systems, Inc. All rights reserved. Important Notices and Privacy Statement
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SOLUTION
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Wholesale Clients acted quickly to replace the LAN infrastructure that supported its London and Amsterdam trading floors.
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iÊ->
>Ê«ÀiVÌ]ÊÌÊÞÊLiV>ÕÃiÊ
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The bank engaged with Cisco, a long-standing strategic partner, to review its requirements and design a new network.
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While improving performance was a key objective, ABN AMRO also used the opportunity to create and implement a
LiÊ>LiÊÌÊÌÀ>ÃviÀÊÌÃÊiÝ«iÀÌÃiÊÊ«ÌV>ÊiÌÜÀÊ`iÃ}ÊÌÊÌ
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standardised build for the Cisco Catalyst 6500 switches that would power its new LAN infrastructure.
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The concept of a standardised build is part of a wider strategy to rationalise the bank’s systems and processes to achieve greater
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efficiencies.
Although it requires
a slightly higher investment up front, this is expected to achieve much higher savings in the
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long-term
on network support, maintenance and management. It also reduces time to market, or the time and cost to complete
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IT
projects.
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Having defined its requirements, the bank now needed to finance an extraordinary capital purchase. This was all the more
problematic
as it came midway through the year and, therefore, the budget cycle. Making an unplanned capital expenditure of this
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would have affected the IT investment programme that was planned for the rest of the year. Another solution was needed.
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troughs.
The bank wanted to make its investment forecasts predictable, so that it could manage cash flow more effectively and
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better
control its budgets. It also wanted to fix the end-date for its use of any new technology in order to drive through its IT
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Clients’ Cisco account manager brought in colleagues from Cisco Systems Capital, the organisation’s financing division.
Cisco Systems Capital developed a proposal for a three-year operating lease with a two-year extension. It included a technology
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refresh
at the end of three years, after which the financing for the remaining two years would be reviewed according to the
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specifics
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“There’s
a strategic aspect to this leasing arrangement,” Peter Josse confirms. “Other priorities can often creep in and push out
ÌÕÀiÊ«ÀiVÌÊ>`ÊÌÀÊÌ
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your existing plans, whereas this approach commits the bank to making certain strategic decisions at three and five-year intervals.
That
is a huge safeguard to an
absolutely critical IT resource.”
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Not
surprisingly, there are also substantial financial advantages to the lease. The terms offered by Cisco Systems Capital included a
buy-back of all the bank’s Catalyst 5500s (some 200). Instead of taking this as a one-off cash injection that would incur tax and
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other
liabilities, Wholesale Clients decided to include it as an offset within the lease. As a result, this is spread over the life cycle of
the
lease and reduces the level of the bank’s repayments over the five-year period.
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equipment using Cisco Systems Capital might be cheaper than using the bank’s own money. However, according to Peter Josse, the
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the five-year period of the deal, we found that the Cisco Systems Capital arrangement allowed us to make savings in the
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The
Cisco Catalyst 6500s went live in the core of the network in London in October 2004, with Amsterdam following in January
2005. Network performance in London immediately rocketed, with switch utilisation going down by around 70 per cent and
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no
problems reported by the users. Four or five peaks in the market shortly after the London deployment had no impact on
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performance
whatsoever.
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Peter
Josse is particularly pleased with the outcome of this engagement with Cisco. “From an IT point of view, we now have
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– and advantageous – monthly costs and a strategic plan in place for future technology refreshes. I couldn’t have
imagined a better result.”
Cisco
Systems, Inc.
All contents are Copyright© 2005 Cisco Systems, Inc. All rights reserved. Important Notices and Privacy Statement
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ABN AMRO’s Wholesale Clients division has installed 200 Cisco Catalyst 6500s in the local area networks that run its trading
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floors
in London and Amsterdam. The core, distribution and access switches are all configured to a bespoke, standardised build
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that
will improve the bank’s time to market on new installations and reduce network maintenance and management costs.
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IEEE 802.3af compliant Power over Ethernet (PoE). This enables Gigabit enabled workstations to take advantage of higher
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bandwidth connections at the edge of the network for greater performance and user productivity. The majority of uplinks are now
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The Catalyst 6500s also provide Wholesale Clients with a roadmap for future developments. As they are multimedia switches,
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delivering sustained performance even under pressure from a rise in the markets. Support for multicast technologies in
the Cisco IOS software makes the switches ideal for the real-time environment of the trading floors. Multicast enables data
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