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IBM wins $157m 'flexible' outsourcing deal
Fireman's Fund seeks flexibility rather than 'just another outsourcing deal'

By Reuters

Published: Wednesday 12 January 2005

A US insurer is handing over its entire electronic infrastructure to IBM and AT&T, giving it access to the latest technology while shedding tens of millions of dollars in upfront investment and long-term costs.

Property and casualty insurer Fireman's Fund will pay IBM, the world's largest provider of computer services, $157m for the seven-year contract to supply an automated data centre and 5,200 personal computers.

Fred Matteson, chief information officer at Fireman's Fund, said in an interview on Tuesday: "This is not just another outsourcing contract. I'm trying to get more flexibility."

California-based Fireman's Fund, a unit of Germany's Allianz, said it planned to run its computer operations out of an IBM data centre in Boulder, Colorado, and share capacity with a few hundred other IBM corporate customers.

"We are using capacity when we need it and not paying for it when we don't need it," Matteson said.

The network promised Fireman's Fund customer service representatives faster access to data on premiums, claims, insurance quotes and other key customer information, he said.

Technology-intensive deals such as this are important for IBM, which derives half its revenues from services and the rest from sales of hardware and software.

Matteson said Fireman's Fund would pay IBM only for the back-office computing power it used, enabling it to save about $88m over the life of the contract.

The company stood to save a further $5m a year, or $33m in total, in telecommunication costs with AT&T, he said.

Traditionally, outsourcing companies such as IBM, EDS or CSC tried to sell customers on managing "your mess for less", wringing out costs and making a profit on running a company's technical systems with more efficiency.