PracticeConsultingUnisys hits jackpot with £300m deal

Unisys hits jackpot with £300m deal

Royal & SunAlliance (R&SA) has signed a 10-year business process outsourcing (BPO) deal with Unisys worth an estimated $450m(£300m).

The deal sees the IT services supplier makes further inroads into the burgeoning market for life and pensions administration outsourcing,where analysts say they expect “a flood of deals” over the next year.

From 1 May Unisys Insurance Services Ltd (UISL), a wholly owned subsidiary of Unisys set up to target the insurance market, willtake over the processing and administration of the 2.4 million life and pensions R&SA policies, following its decision in August to closeits UK life operation to new clients.

Peter Hanby, managing director of R&SA’s UK Life operation, explained that the 10-year deal was driven by the significant challengesof maintaining administration costs, motivating staff and the need to migrate to a new IT platform.

“There’s a risk of service levels falling off,” he said. “If we don’t satisfy our policy holders, we lose clients and we lose income. It’s alsodifficult to encourage shareholders to invest in a book that’s running off.”

Hanby indicated that it would improve customer service, reduce costs per policy and expand the professional opportunities of the 1,700employees transferring to UISL.

Anthony Miller, principal analyst at Ovum Holway, said: “Typically you wouldn’t go through the pain of outsourcing unless you could cutcosts by 20 to 35 per cent.

“Financial services companies are one of the last bastions of in-house processing. We have seen some major deals of late.”

Miller added that signing a second major insurance company would add to UISL’s credibility.

“Insurance back-office processing is a red hot market in which other companies, particularly Capita and Indian offshore companies, arevery keen to play,” he explained.

In December 2000 UISL signed a £225m, 10-year deal to provide managed insurance administration services across 1.7 millionpolicies for Abbey Life.

UISL managing director Peter Thomas insisted that using the same technology for service delivery across all its clients was a strategicintention.

But the migration of R&SA policies to a new Unisys administration system is expected to take up to four years to complete.

Unisys’ imaging and workflow technology will also be introduced to improve the efficiency of existing administration systems.

“People assume that successful BPO equals technological transformation,” said Thomas. “But the bigger challenge is an operational one:what people do and how effectively they do it. Throwing money at IT is actually quite high risk.”

He added that the deal highlighted the growing importance of BPO for Unisys, which already generates approximately 30 per cent of revenues for the company.

“It’s been the number one priority for the last two years,” said Thomas. “It’s a huge opportunity. Any hardware that’s commoditised is not where we want to compete.”

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