Deal to generate a billion in savings

08.08.2005
Von Samantha Perry

Computer Sciences Corp. (CSC) and Telkom last week announced an outsourcing deal with Nedbank and Old Mutual SA (both part of the LSE/JSE listed Old Mutual Group) valued at Rand 1.8 billion (US$275 million) over the next five years. Old Mutual says the deal will see them saving some Rand 1 billion through establishing a shared voice/data network.

Under the terms of the deal, Telkom and CSC will be responsible for establishing and operating a shared network for the financial services companies. The deal also includes network security and help desk support.

The network, including all WAN, LAN and voice telephony services, has been designed by CSC and Telkom and will be implemented over a two-year period. While the deal will encompass a major network overhaul for both parties, due to its nature no capex will be involved.

"This venture will allow Nedbank to demonstrate business value, reduce the risk of technology failures and leverage the buying power of the two organizations," says Willie Scholtz, divisional director of Group IT Operations at Nedbank. "Old Mutual and Nedbank will benefit from immediate and significant cost reductions, and will have access to leading-edge technology with no capital expenditure requirements."

Old Mutual MD, Roddy Sparks, says the company expects to save Rand 300 million over the contract period, Rand 30 million of that in this year.

According to Theo Nkone, CIO at Old Mutual: "This agreement is the first joint implementation between two major financial services companies in this country, and enhances the reach and range of services Old Mutual and Nedbank can offer at their many locations."

Nedbank Group CEO, Tom Boardman, says his company expects to save some Rand 700 million over the next five years, with some Rand 60 million in savings realized this year.

This agreement follows on a seven-year, $300 million outsourcing agreement CSC signed with Old Mutual in 1999, under which CSC manages Old Mutual"s local IT infrastructure. This deal ends next year and CSC SA MD, Martin Vergunst, says the companies will be looking at renegotiating the contract. "We are not formally renegotiating yet, it is too early for that, but we are continuing to provide the services, the relationship is good, and this new deal further cements our relationship with Old Mutual and the group. We are currently in positive discussions with OM, and look forward to definitive discussions regarding the renewal."

CSC states that it expects to get some $125 million out of the Nedbank/Old Mutual deal.