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AIB settles action over 'problematic' IT systems

ALLIED Irish Banks (AIB) has settled an action against two international companies over a software product that was allegedly "beset with serious technical problems".

The bank had claimed it spent about €84m on a new retail banking software system in 2007, but that this ended up being "wasted expenditure".

It brought proceedings against Oracle Financial Services Software BV (OFSS BV) and Oracle Financial Services Software Ltd (OFSS Ltd), related companies based in the Netherlands and Germany.

OFSS BV was sued as alleged provider of the software and OFSS Ltd was sued as alleged guarantor. Mr Justice Peter Kelly was yesterday told a settlement had been reached and made an order striking out the proceedings.

AIB claimed it was supplied with a Flexcube software product which was "beset with serious technical problems". Just 3,000 customers out of an expected five million switched over to it in a three year period.

Work on implementing the Flexcube product ceased in March 2010 and the bank then decided to decommission the accounts using it. AIB claimed it then had to return to using its existing retail banking system.

It claimed all costs and expenditure on the project were "wasted" and claimed an estimated €84m for that. It also claimed damages for loss of profits and damage to goodwill.

It was claimed that in December 2005, OFSS BV agreed to provide software and related services to AIB for its corporate banking division while OFSS Ltd provided a guarantee and indemnity in favour of the bank. This was known as Project Pentagon and was not part of the bank's action.

Under the 2005 agreement, AIB claimed it was also granted an option to procure Flexcube Core Banking software to use in its retail banking operations.

It claimed an agreement was made in 2007 under this option and the provision of the Flexcube project became known as Project Acorn.


AIB claimed that due to serious technical and other problems, work on implementing the Flexcube product ceased by March 2010 and the bank's expenditure was wasted.

The bank said OFSS BV told it in March 2010 that it planned to cease development of the Flexcube product on IBM's z/DB2 platform for western banks, but would continue to work on the product for AIB.

That meant AIB would be the only western bank using the z/DB2 platform. The bank claimed it could not contemplate this situation as it had been promised upgrade costs would be shared across a number of similar banks and this would not now arise.

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The bank also claimed that an alternative product on the Oracle platform offered by OFSS BV was "wholly unsuitable".

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