AXA Sun Life has signed a £70m outsourcing contract that will see
the transfer of more than 400 of its application management
services staff to the FI Group.
David BrownThe insurance giant hopes the five-year deal will reduce its IT
spending by half, saving £20m a year.
By the end of the contract, AXA expects just 200 of the
transferred staff, based at Bristol, High Wycombe and Coventry, to
be working on AXA projects. The rest of the staff who go to FI
could find themselves working on a wide range of projects,
including some for other insurance customers.
FI Group will be responsible for the support and development of
AXA's legacy life and pensions administration system and will
implement new systems to increase speed to market and improve
product flexibility.
However, outsourcing in the financial services industry can be a
risky business. The early termination of CGNU's seven-year £124m
contract with IBM after only two years (Computer Weekly, 1 March)
illustrated the dangers of long-term agreements which are not
flexible enough to accommodate company mergers and
restructuring.
Andrew Goldsworthy, AXA's chief information officer, insisted
that the FI deal would be able to cope with unexpected changes to
its business. "This is different from the CGNU contract, which, I
believe, was for infrastructure outsourcing. Our contract says that
the systems must be flexible and responsive to the changes which we
can expect in this industry," he said.
The outsourcing deal is part of AXA's plans to reduce its
overall operating costs by 40% over the next five years. The
cost-cutting has been precipitated by reductions in commissions due
to the 1% charge limit on stakeholder pensions and tighter margins
on other financial products.