T-Systems in R1.8bn Mutual Outsource Deal in South Africa

Mergers, Acquisitions and Financial Results

Technology outsourcing specialist T-Systems has won a R1,8bn deal with Old Mutual and Mutual & Federal, transforming it from a lowly 11th in SA's outsourcing market into the sixth-largest player.

The deal comes at the expense of rival CSC, which has been ousted from its relationship with Old Mutual and will have to transfer 300 of its technicians over to T-Systems. T-Systems CEO Mardia van der Walt-Korsten said this was one of the largest outsourcing deals in the local financial services sector.

"The goal of any good outsourcer is to renew contracts. It's also imperative to get new customers on board -- 40% of companies decide to change partners .

"We have never been part of that statistic," she said. CSC's website still lists Old Mutual as its top client. The group took over Old Mutual's data centre and 420 staff and bought out most of its hardware and software assets for R130m in November 1999.

CSC will now have to reorganise the facilities it uses to host information for some of its other clients, since it has been using the data centre in Old Mutual's premises.

Its MD Martin Vergunst could not be reached for comment last week. The five-year deal is the largest T-Systems SA has clinched.

It will supply and maintain many of the information and communications technologies used by Old Mutual SA and short-term insurer Mutual & Federal.

The job includes identifying new technologies to boost their businesses, as well as providing hardware and software, and running the data centre, help desk and disaster-recovery services. Old Mutual SA MD Paul Hanratty said that outsourcing its IT services since 1999 had taken its technologies to a higher level and introduced cost efficiencies.

When the existing contract expired, other suppliers had been assessed and CSC, IBM and T-Systems were short listed. After a rigorous evaluation, T-Systems had won, partly because its strong empowerment profile meant South African managers were serving South African customers, Hanratty said. "It was important that we were not dependent on IT professionals operating from abroad." He expected the new deal to generate more cost savings and improvements in its use of technology.

Mutual & Federal's IT manager David Entwisle said the company had outsourced its mainframe management to CSC, but relying on those legacy systems was hampering its ability to compete in the market. Introducing newer technologies and letting T-Systems handle the complexities would produce far higher service levels at a lower cost, he said.

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