GijimaAst to trim Absa costs

By Nicola Mawson, Contributing journalist

Johannesburg, 12 Jul 2006

JSE-listed GijimaAst will start phasing in its R960 million outsourcing contract with big four bank Absa shortly.

The five-year contract with the bank, majority-owned by UK bank Barclays, will see GijimaAst provide distributed computer support.

At an event this morning, the ICT company indicated this would be the first time it was offering such a wide range of services to a client. While it is offering some of the services included in the scope of the contract to other clients, it has not previously bundled them all together.

As such, the contract will require both parties to invest in operational and capital expenditure in aspects such as infrastructure, physical hardware and skills. However, GijimaAst FD Carlos Ferreira was unable to quantify the exact investment at this point.

GijimaAst CEO John Miller said the phase-in capital expenditure could initially impact margins negatively. However, this was expected to be for a limited time. As the company is seeking to reduce its own costs by December, the effect on margins should mostly be neutralised, if not in positive territory.

Cost crunch

Cost saving at the bank was a vital scoring point for the ICT company. "To win this contract, we had to prove that we could significantly reduce Absa`s operating costs in SA over the five-year term and create an improved service experience for the end-users," said Miller.

When Barclays initially pitched to buy the majority stake in Absa, it aimed for synergy-related savings of R1.4 billion. GijimaAst executive director Pieter van der Merwe said the deal, which the company stressed was not an extension of the existing seven-year relationship, would "make a nice commitment to saving on our costs".

This drive to reduce costs at Absa will provide GijimaAst with an opportunity to reduce its own costs, even though these will initially increase.

Some of the new costs will be incurred as GijimaAst sets up what it calls concentration centres on remote locations. These centres will provide swap-out hardware for Absa.

This will be required by its "butler" - or technical courier - service, which is an enhancement that will allow the company to replace broken services, instead of fixing them on site. It will also be implementing self-help functionality, as well as remote monitoring and support functionality.