Old Mutual Outsources IT to Increase Focus on Core Business

In the late 1990s, as the highly competitive life insurance industry became more client-centric, Old Mutual South Africa decided to focus on its core business and to outsource non-core areas, such as its IT infrastructure, to specialists.

Old Mutual plc, the UK-based international financial services group, chose CSC to manage the IT infrastructure and service delivery capability of its Old Mutual South Africa subsidiary through 2006. Over the first two years of the operation, CSC has worked with Old Mutual South Africa to meet tight deadlines, improve service levels and reduce costs.

Flexible approach

Old Mutual believed that forming an alliance with a respected, proven IT outsourcer would help it make significant savings - by moving from a fixed- to a variable-cost basis - and would provide enhanced IT service levels to its business units. It also felt that an alliance with a global IT company would give it access to the resources and international best practices, skills and technologies that would be required to stimulate high value-adding activities.

Rather than issue a tender, Old Mutual decided to select one IT outsourcing company and establish a long-term alliance. The company's IT Services Manager, Doreen Buultjens says, "Old Mutual's initial inclination was to enter into a joint-venture investment arrangement with an outsourcer. CSC alone appeared willing to discuss this possibility, which meant that other contenders ruled themselves out at an early stage."

The company's key reasons for choosing CSC were its flexibility to work within rapidly changing parameters, its track record of delivering IT infrastructure services at competitive prices, and its willingness to sit down with the client and resolve the real issues.

"Compared with the cost of doing it ourselves in-house, we reckoned we would get a good deal from CSC," says Buultjens. "Their clients were full of praise for their quality of service, their flexibility and their willingness to collaborate closely with customers, so we felt confident CSC could do the same for us."

Exceeding expectations

CSC worked closely with Old Mutual staff to ensure a smooth transition. Tight deadlines and stringent service levels were agreed upon, increasing over time and carrying penalties if not met. In November 1999, CSC took over Old Mutual's data center building and staff of 420, providing an operational unit from day one. The first two years were spent improving Old Mutual's service levels and reducing its costs.

Buultjens engenders a great deal of confidence in CSC's approach to the relationship. She says, "Whenever we have a problem that cannot be resolved within their South African resources, they do not hesitate to call in specialists from other parts of the world. CSC works very hard at finding solutions to particular problems."

Vic Lumby, Old Mutual's CIO, says that he was delighted that the contract was working well - it had delivered the price reductions and cost savings envisaged, and the service level improvement was way beyond what he had expected.

Lumby says, "The alliance we entered into with CSC is really working for us. They have delivered in line with their commitments and there have been no concerns raised by business units in terms of their service delivery. They have proved flexible in approach and we are actively examining other areas where we can extend our relationship."

Buultjens adds, "Our service levels have increased significantly since CSC became involved. External benchmarks by Gartner Group now show our service levels to be among the highest in the world."

Buultjens concludes, "After just over two years, CSC continues to live up to Old Mutual's expectations. They have achieved and, in some instances exceeded, the savings envisaged in our original business case. Old Mutual has benefited greatly from the outsource and we feel we have had a very good deal so far."

The Old Mutual South Africa story

• Control of IT service and costs with full exit flexibility.
  
• Major savings over seven years against fixed baseline.
  
• Shift from fixed- to variable-costs.
  
• Access to CSC resources and strategic capability.
  
• Staff now have careers in global IT company.
  
• Increased focus on core business areas.
  
• Gartner Group benchmarks indicate service levels among the highest in the world.
  
• Savings to date exceed business case despite increased volumes.
  
• Significantly improved accuracy and timing of billing and other information to business units.

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