Financial-services groups Old Mutual and Nedbank on Thursday announced one of South Africa’s biggest information and communications technology (ICT) deals to date, which will enable both companies to achieve collectively cost savings of more than R1-billion over the next five years.
Unveiling the R1,8-billion outsourcing agreement, the companies said it will see Old Mutual and Nedbank establish a shared IT network managed and operated by Telkom and Computer Sciences Corporation (CSC), and will encompass a complete overhaul of all voice and data communications technology components with no capital expenditure for Old Mutual or Nedbank.
The shared network is expected to drive down network and telecommunication costs significantly, improve business functionality and increase service levels.
Old Mutual MD Roddy Sparks said: “This joint initiative is good news for our shareholders and demonstrates the commitment of the various businesses in the group to finding synergies that will cut costs and propel growth. We are extremely pleased that the savings are expected to be achieved without job losses.”
Old Mutual expects to save more than R300-million over the life of the contract, with this year’s savings expected to be about R30-million, he added. Old Mutual and Nedbank will achieve savings broadly in line with each company’s transaction volumes.
Nedbank CEO Tom Boardman added: “This outsourcing contract will result in considerable savings for the Nedbank group and highlights the value that can be unlocked through collaboration with Old Mutual. Nedbank expects to save R700-million over the next five years, with about R60-million being realised in 2005.”
“A key element of the Nedbank group’s recovery programme is containing expenses. It is therefore critical that as the group invests in technology and infrastructure-related projects, we source the most efficient option, and this has been delivered by Telkom/CSC,” he added.
The initiative is the culmination of work that started in 2003, when a joint Old Mutual and Nedbank team began investigating the feasibility of a combined communications network as one of many synergies across the group.
The state-of-the-art network, encompassing all areas of the wide-area network, local-area network and telephone voice services, has been designed by the joint teams of the organisations, CSC and Telkom, and will be installed over the next two years.
The single, multiservice network is based on mainstream and best-in-class products and services and is managed by a single service aggregator (a single point of contact for all communication and services).
By taking this route, Old Mutual and Nedbank will be able to exploit the benefits of network convergence, such as increased flexibility and reduced costs.
Old Mutual chief investment officer Theo Nkone commented: “This network will shape and impact the telecommunications industry. It reflects Old Mutual and Nedbank’s IT leadership and enhances the reach and range of the services it can offer at many locations throughout South Africa.”
According to Willie Scholtz, divisional director of group IT operations at Nedbank, both Old Mutual and Nedbank will benefit from immediate and major cost reductions and the group will have access to leading edge technology with no capital expenditure requirements.
“This is a new and exciting venture for Nedbank. It will allow us to demonstrate business value, reduce the risk of technology failures and leverage the buying power of the two organisations,” he concluded. — I-Net Bridge