The 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.