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Oxford Health scraps $330m IT outsourcing deal

Less than two years after signing an IT outsourcing deal with Computer Sciences (CSC), health maintenance organisation Oxford Health Plans has cancelled the deal, which was reported to be worth around $330m (£225m)

The agreement with CSC was to focus on data centre operations, helpdesk services, desktop systems and network operations. However, Oxford spokeswoman Deborah Abraham said Oxford ended the deal last month because it believed it would be more cost effective to bring the outsourced IT functions back in-house.

She added that since Oxford signed the deal in November 2000, the business environment, as well as the US health provider's strategic goals, had changed.

"The original deal was for limited operations," she said. "The company is now entering a growth phase, and bringing these [IT functions] back internally gives us more flexibility to redeploy personnel from one department, and it will be more cost effective."

Oxford's IT department continued to handle the application development and maintenance, database administration, quality assurance, program management and architecture issues. Oxford had hoped to save money and upgrade its technology capabilities through the outsourcing agreement.

The two companies are discussing the financial arrangements associated with ending the deal - including whether Oxford will pay a termination fee - and are not releasing detailed financial information, Abraham said. Oxford, said it may experience a one-time charge that would not exceed $10m (£6.8m) in connection with ending the deal.

Abraham said most of the workers who had moved from Oxford to CSC as part of the original arrangement would be offered jobs within the HMO. Originally, about 200 employees moved over to CSC as part of the outsourcing deal.

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