Listed financial services group Old Mutual has awarded a five-year, R2.5 billion telecommunications outsourcing contract, the largest IT deal it has inked since it came into being in 1845.
The outsourcing contract, thought to be the biggest telecoms outsourcing deal in the financial services sector, has been signed with Dimension Data, supported by Telkom and Nashua Communications. It will come into effect on 1 August and covers the group's local operations: Old Mutual SA, Nedbank and Mutual & Federal.
Old Mutual, which is headquartered in London, operates in 33 countries and has more than 15 million customers across the globe. It has a majority shareholding in Nedbank, and offers short-term insurance through Mutual & Federal, and long-term savings and investments through its Old Mutual brand.
The group has a market capitalisation of R82.7 billion and reported an adjusted operating profit of £1.5 billion, or about R16 billion, in its last financial year to December.
Old Mutual's telecoms outsourcing contract, announced yesterday, is the largest IT outsourcing contract in the local unit of the financial services company's history, says Richard Boynett, CIO of Old Mutual's long-term savings division.
The deal covers all of Old Mutual's telecommunication requirements, Boynett says. The outsourcing partners will provide data services, including wide area and local area networks, third-party connectivity and Internet access, as well as voice services, multimedia collaboration and management services.
Three years ago, Old Mutual signed what was then considered to be the biggest outsourcing deal in the history of SA's financial services sector when it awarded a R1.8 billion IT contract to T-Systems.
The contract, known as Project Rosa, covered supply and maintenance of IT infrastructure to Old Mutual SA and Mutual & Federal. T-Systems edged out the then incumbent service provider Computer Sciences Corporation SA to secure the deal. The contract is still in place.
Managing connectivity
Dimension Data and Telkom will manage the “communications tower of the group's South African IT estate for the next five years”, says Old Mutual.
Dimension Data, the prime contractor, was bought by the world's second-largest telecoms company, Japan-based Nippon Telegraph and Telecom, for R24 billion, last year.
Under the contract, Dimension Data will handle the aggregation part of the outsource deal, while Nashua Communications will take care of the fixed telephony, including the current PABX system, while Telkom will provide the telecoms infrastructure, says Boynett.
Dimension Data Middle East and Africa services executive Brent Flint says the outsourcing deal with Old Mutual is the largest in the history of Dimension Data's IT outsourcing services. Flint says Dimension Data, as the primary contractor, will integrate services from the other outsource partners.
Telkom's senior managing executive for enterprise markets, Brian Armstrong, says the partnership between Telkom and Dimension Data offers Old Mutual value and flexibility driven by a strong element of innovation.
Outsourcing headaches
The deal is a third-generation outsourcing contract after the previous award came to an end after being extended for a year past its five-year period, says Boynett. The main change from Old Mutual's previous contract is that CSC, which used to handle aggregation, has been replaced by Dimension Data, he notes.
Boynett explains that Old Mutual appointed Dimension Data to manage the outsourcing rather than deal with several partners itself. He says DiData will add value by providing flexibility to allow Old Mutual to adapt to technological changes. “It's critical that we get it right.”
Dimension Data will overlay service management on top of the services provided by the other partners and will handle Old Mutual's end-to-end telecommunications, he adds. “They get all the headaches.”
Boynett says the deal is limited to Old Mutual's South African operations, but the group will use it as a “learning curve” to structure similar outsourcing arrangements in its international operations to connect the group efficiently.
Old Mutual says the contract allows it to pursue its business and technology roadmap for the future. If Old Mutual adds to its stable or sells a unit, “no-one will be disadvantaged”, says Boynett. The contact is expected to generate “significant” savings over the next five years.
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