IAG insources, but keeps IBM near and dear

After almost a year in contractual limbo land, details are finally starting to emerge as to the full scope of Insurance Australia Group's $323 million insourced IT future, with a few rays of sunshine poking through for embattled outsourcer IBM.

Computerworld has learnt the general insurer is negotiating hard to retain IBM as a core technology partner for hardware, software and consulting, with a view to increasing the amount of business it does with Big Blue after its previous "facilities management" contract bit early this year.

Originally a seven-year contract, IBM's tenure lasted only until a mid-term review in 2002 whereupon rumours of corporate divorce ran rife after IAG told shareholders in January it would wrest back control of its IT infrastructure.

Yet, with the insourcing initiative now in full swing, IBM appears to have been told to stop packing and sleep in its own room rather than be thrown out on the street.

Sources close to negotiations told Computerworld that while "redefining of the [IBM] relationship" was prompted by the acquisition of state insurer CGU, and its in-house IT services, a less-than-subtle irony existed in CGU making much better use of IBM's infrastructure - without inflexible "facilities management".

The source said that although the facilities management contract had good intentions, it left IAG poorly placed to integrate acquisitions such as CGU.

Details of a presentation by IAG chief information officer David Issa obtained by Computerworld reveal IAG is currently completing a total refresh of its desktop fleet to "all new" by June, 2004, standardising over Office XP and Outlook with support, service desk and SLAs based on the CGU model staffed in-house through the acquired IT capability of CGU.

Mainframes will be rationalised from the three existing systems into a single, newly leased one, with a purpose-built data centre in Melbourne to replace those in Sydney's Baulkham Hills (IBM) and Melbourne's Latrobe Street (CGU). Storage capability will also be consolidated and standardised across a "one consistent preferred technology" which will span across "mainframe, mid-range and NT environment[s]". Data recovery will be outsourced.

Applications are also undergoing an overhaul with a Web-based frontend "based on sales and marketing and manufacturing needs" aiming for a more flexible process model, fewer screens and faster response to product changes and enhancements. New underwriting engines are also understood to be in development, although the exact amount of application code-cutting off-shored to Indian firm Phoenix Global Solutions remains unclear.

While declining to elaborate on details of the insourcing efforts, Issa said the project was going well.

"It's still on track. We want to make the transition as smooth as possible. It's a delicate situation from a lot of perspectives. [IBM] is being very supportive," Issa said.

– with Siobhan McBride

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