AXA deal breaks the mould

An innovative £630m deal between AXA and IBM for "on-demand" computing has been hailed as breaking the mould of traditional...

An innovative £630m deal between AXA and IBM for "on-demand" computing has been hailed as breaking the mould of traditional outsourcing deals by not transferring IT staff to the supplier.

Under the six-year deal, which was announced by the insurance giant last week, IBM will provide AXA with IT capacity on demand. AXA estimated that it will save £350m over the duration of the contract.

Outsourcing experts said the deal avoided the potential pitfalls of large-scale outsourcing deals, which can prove unpopular with staff transferring to the supplier and face opposition from unions.

"AXA and IBM should both be congratulated for the infrastructure deal they have recently constructed - but as nothing transfers to IBM it is not outsourcing," said Phil Morris, director at outsourcing advisory firm Morgan Chambers.

The deal will also help the insurance company to meet regulatory challenges such as the New Basel Capital Accord on risk management, Morris said. However, he warned that the deal may lack the flexibility of traditional outsourcing deals.

Under the contract, IBM will consolidate AXA's server, mainframe and storage systems. AXA will retain control of its IT infrastructure and IT staff. IBM will provide computing capacity priced on a usage-based licensing model.

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