Friends Provident signs £200 million deal with IBM to outsource IT and infrastructure services

10 December 2008

Friends Provident today announces that it has appointed IBM to manage its IT requirements and deliver its future infrastructure services in a 10-year deal worth £200 million. The deal will generate potential annual cost savings for Friends Provident initially of around £6 million a year, which are expected to increase over the term of the contract.

Friends Provident outlined in its strategic review, in January 2008, its aim to make annual savings of £40m, over a two-year period, from its operating cost base and to consider alternative sourcing strategies. The company announced at its interim results (7 August) and its Q3 interim management statement (31 October) that it has made significant progress towards this target. The contract with IBM will assist in achieving further significant cost reductions by, among other things, increasing standardisation, implementing rigorous processes, using shared infrastructure and offshore resources.

The agreement, which supports Friends Provident’s strategy, includes every aspect of the technology infrastructure including software, hardware and services. It also provides an opportunity for all hardware to be refreshed and in future the ability to provide mainframe capacity on demand through IBM's cloud computing technology.

Trevor Matthews, chief executive officer of Friends Provident said,

“I am delighted to be entering into this contract with IBM at this very important time in the rebuilding programme for Friends Provident. This is a big step forward in achieving our targeted £40 million of annual cost savings by the end of 2009.

The cost savings we will realise under this contract will help to make Friends Provident a leaner, fitter and more efficient business without compromising the market leading levels of service we are renowned for. By partnering with IBM, one of the world’s leading technology providers, we will gain access to the latest processing power and the expertise to improve our service and technology further. It sets us up very well for the future and is further evidence of the forward progress we are making.”

Bruce Ross, General Manager, IBM Global Technology Services, UK and Ireland said:

“Consolidating the whole spectrum of technologies from hardware, software and services into a single service-based contract will allow us to enhance integration and improve flexibility across the enterprise in order to support Friends Provident’s evolving business requirements. The resulting on-demand infrastructure will provide a platform on which Friends Provident can focus on its core value proposition and the provision of excellent service to its customers.”

Friends Provident is working closely with IBM to plan the transition process and transfer of responsibility for delivery of IT services. This process will be completed by March 2009 and will involve the transfer of around 200 employees to IBM and its partners. This transaction will result in IBM recording a signing of approximately £150 million in the fourth quarter of 2008.

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