Zurich Financial Services, one of the world's largest insurers, has signed a US$1.3 billion, 7-year outsourcing agreement with CSC to hand off new application development and the management of more than 4,000 existing applications.
Zurich's server infrastructure will continue to be managed in-house, but the deal, signed July 23, will transfer about 1,600 of the Zurich-based company's 5,000 IT employees to El Segundo, Calif.-based CSC. About 650 of the employees being transferred are U.S.-based, Zurich said.
U.S. employees and personnel in the U.K. and Switzerland are expected to transfer to CSC in the fourth quarter, and employees in Germany are expected to move over during the second half of 2005.
"We're getting a very, very flexible framework where we can redeploy our skills and resources almost to any needs we want," said Michael Paravicini, Zurich's chief information technology officer. "Secondly, it's about productivity. It's about leveraging the expertise CSC has, making sure we can streamline our applications landscape and reduce the number of platforms and systems in it."
Paravicini said Zurich also expects to reduce costs by about 20 percent by employing CSC. "We (expect to) get to a very reasonable benefit early on in the contract, which is very important to me."
Paravicini said the global organization has traditionally been a geographically oriented operation, in which each region runs on its own unique business applications. Last year, in a move to standardize operations and cut costs, the company finished consolidating its physical infrastructure in two data centers, one for European and Asia-Pacific operations and one for U.S. operations.
Zurich has several lines of business, including global corporate customers, life insurance, international business customers, European personal and business customers, U.S. personal customers, U.S. small-business customers and other commercial customers in the U.S.
"Early on, we made a decision to make a change to our business's operating model. To do this, you need a global IT architecture which is properly aligned for supporting this," Paravicini said.
About 85 percent of Zurich's applications are homegrown, according to Paravicini, who said the company will likely choose to standardize on some of its existing platforms instead of developing or buying new ones.
Paravicini, who came from the banking sector to Zurich Financial in 2003, said his company and the insurance industry as a whole are playing catch-up to technology consolidation and upgrades that the banking and brokerage industry made five to seven years ago.
Paul Defuria, chief technology officer of CSC's Financial Services Group, said his company will focus primarily on Zurich's bread-and-butter applications of insurance underwriting and claims.
"Certainly, they have an incredibly large insurance portfolio with millions of policies. Policy administration, just by the sheer weight of it, is important," he said. "Being able to streamline the production portfolio by using common technology and applications is something CSC has experience with."