Zurich Financial Services has signed an IT outsourcing deal with Computer Sciences Corporation worth an estimated £700m.
The financial group expects to save about £160m during the seven-year deal that will see CSC take over the development of new IT applications and support existing applications.
The deal will cover Zurich’s businesses in the UK, the US, Switzerland and Germany.
IT systems covered by the deal include all insurance lines written by Zurich and all business processes - including new business and underwriting, customer service and claims.
About 1,600 Zurich IT staff are expected to transfer to CSC in the final quarter of this year. Zurich staff in Germany are expected to transfer during the second half of 2005, subject to consultation and regulatory approval.
The deal between Zurich and CSC shows continued demand for large IT outsourcing deals despite criticism from some experts that this type of contract may not be flexible enough to meet changing business circumstances.
Michael Paravicini, chief information officer at Zurich, said the company will retain control over critical IT systems for the business.
Outsourcing to CSC is part of Zurich's long-term strategy that has already seen desktops and networks outsourced to different suppliers. A “certain proportion” of the CSC outsourcing deal, he added, would be handled offshore.
"This agreement will introduce new efficiencies in applications service delivery and help us direct the right resources to the right business priorities when and where we need them," said Paravicini.
Following a nine-month decline, the number of mega-outsourcing deals - those valued at £545m or more - is on the rise, according to research published last week.
Big IT outsourcing contracts signed so far this year include a 10-year, £2bn agreement between the BBC and Siemens Business Services; a £400m deal between Barclays and Accenture and a £600m extension of an existing deal between Bank of America and EDS to integrate FleetBoston Financial's communication infrastructure into Bank of America's voice and data network.