Alphabet Inc’s Google and Deutsche Bank AG have agreed to form a long-term partnership that would see the US technology company provide cloud computing capabilities to Germany’s largest lender.
“The partnership with Google Cloud will be an important driver of our strategic transformation,” Deutsche Bank chief executive officer Christian Sewing said in a joint statement yesterday, confirming an earlier Bloomberg News report. “It is as much a revenue story as it is about costs.”
The contract is to last at least 10 years and Deutsche Bank expects to make a cumulative return on an investment of 1 billion euros (US$1.1 billion) through the alliance, said people with knowledge of the matter, who asked not to be identified because they were disclosing private information.
The companies also plan to make joint investments in technology and share the resulting revenue, which could lead to engineers from both firms developing products together, they said.
Sewing a year ago unveiled a strategy centered around deep cost cuts, including spending on information technology. He also hired Bernd Leukert, a former executive at German software giant SAP SE, to accelerate the bank’s efforts to digitize its operations.
The companies declined to comment on how much Deutsche Bank would pay for Google’s services, and the bank did not indicate what cost savings it expects to generate from the arrangement.
“We’re excited about our strategic partnership and the opportunity for Google Cloud to be helpful to Deutsche Bank and its clients as they grow their business and shape the future of the financial services industry,” Alphabet chief executive officer Sundar Pichai said in the statement.
The companies have signed a non-binding letter of intent and plan to finalize the contract in the coming months, they said.
The deal is a notable win for Google as it tries to show that its cloud business can service the financial sector. To date, Google’s only major bank customer was HSBC Holdings PLC, but Google Cloud chief executive officer Thomas Kurian has made the financial industry one of his key customer targets since joining in late 2018.
In the past few years, European banks have started pouring billions of euros in attempts to modernize their information technology, frequently opting to put more of their data onto the cloud. That has lured big US providers, including Google, Microsoft Corp and Amazon.com Inc, a Bloomberg survey conducted earlier this year showed.
The increasing reliance on US firms has stoked concerns in Europe’s technology industry, and banking executives have called on companies in the region to develop alternatives.
Sewing in 2018 called “the likes of Google” the biggest threat to traditional banks.
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