Sun Life close to $250M outsourcing deal with IBM

IBM Canada Ltd. and Sun Life Assurance Company of Canada are on the verge of an outsourcing agreement worth about $250 million.

The seven year deal, which the companies

expect to be signed in July, would see IBM take over operational services for Sun Life Financial. According to John Wright, Sun’s executive vice-president and chief information officer, Big Blue will be responsible for core data centre services. This will include the mainframe environment, e-mail, Lotus Notes applications support, Web hosting and network security (which encompasses firewall management and intrusion detection services).

While it is handing over what Wright calls “”commodity-type functions,”” Sun Life isn’t turning over all IT responsibilities. “”We are keeping the wide area network and the distributed computing applications, which are considerable,”” he says. “”About 60 per cent of our infrastructure is being kept in-house.””

Wright says cost cutting was one of the driving forces behind the decision. He cites IT security as an example of a rising cost and one that can’t be done on the cheap. So as some areas demand more and more money, savings must be carved out of other areas like outsourcing. Beyond the dollar value, he says the deal would allow the IT department to concentrate on other matters.

“”It allows us to keep more of a competitive edge, or strategic focus, if you will, on other areas of technology. Distributed computing is something that puts more and more demands on us,”” Wright says. “”Most financial services companies find themselves in a situation where they have a lot of distributed computing applications and they need to be better managed. We need to have more of a strategic focus towards the architecture of these types of applications.””

Approximately 120 Sun Life IT workers are expected to cross over to IBM. This amounts to about 25 per cent of the IT staff. “”They’ll work in the same location, performing the same services, and we will have a lot of continuity with the knowledge base to transition over,”” according to Wright.

While Wright says he expects a deal to be signed on or around the beginning of next month and that both parties have smoothed out the rough edges, some terms have yet to be negotiated. IBM spokesperson Maureen Rourke says it is still unclear how long the transition will take and how much interaction there will be between the IT groups.

IDC Canada analyst Jason Bremner says once the deal is signed, the transfer of power should be a straight forward process.

“”It’s not like a government ministry outsourcing with five different unions involved, or citizens who object to this business,”” Bremner says. “”IBM has been doing this for many years and can bring that expertise to Sun Life.””

IBM struck an outsourcing agreements earlier this year with Toronto-based Manulife Financial Corp. while opening an International Insurance Solutions Centre in partnership with the University of Waterloo.

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