Prudential considers in-house IT move

Financial services provider Prudential is reviewing a major outsourcing deal to investigate the potential of bringing its IT operations back in-house.

About 80 per cent of Prudential UK’s datacentre requirements are outsourced to supplier Capgemini in a five-year contract that expires in April 2006.

The insurance giant is undertaking a benchmarking exercise, which began late last year, to determine the level of service and value for money offered by the deal.

The outsourced servers run some of Prudential UK’s key business applications.

Speaking exclusively to Accountancy Age’s sister publication Computing, Prudential chief information officer John Worth says the benchmarking will analyse whether or not operating the service internally could help the company run more applications across a range of countries.

‘If we can create a datacentre that supports more than one of the group’s business units, there should be substantial savings to be had,’ he said.

‘We might, for example, be able to create a datacentre that can run the UK’s activities and the North American activities.’

Prudential is benchmarking its datacentre provision against a number of criteria, including service levels, risk and cost.

‘Our decision is driven by economies of scale we see across the group, and it would be silly not to look at the advantages that we might take from those economies,’ said Worth.

The organisation expects to make a decision on the future of the outsourced service in the next three to six months.

Neil Barton, vice president of benchmarking and measurement at analyst Meta Group, says the extent of ‘insourcing’ is very limited at the moment.

Last September, financial services group JP Morgan Chase announced its intention to cancel a $5bn outsourcing deal with IBM. And Cable & Wireless announced in 2003 it was terminating an agreement with IBM.

But Barton expects more companies to start considering the value they receive from outsourcing contracts.

‘The services you’re getting after three years are often nothing like what you expected at the start of the deal,’ he said.

‘Running a benchmark exercise can tell you how many people you would need in-house.’

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