10.00am - By RICHARD WOOD
Tower New Zealand is to pay local firm Axon about $10 million over five years to manage its desktop IT.
Chief information officer Ed Saul, recently promoted to CIO of Tower Group covering Australia and New Zealand, said Axon had the best price, but its history with
Tower Health and a willingness to take on over half the staff from Tower's 20 strong IT group were other factors. Eight redundancies are expected.
"None of the others wanted to take any staff," he said.
The Herald understands Axon beat Computerland and Hewlett-Packard for the outsourcing deal.
Saul said the main purpose was to put PC desktop and network maintenance and support in the hands of specialists so the company could focus on strategic IT projects.
He said IT costs have already been reduced by $4 million per year by consolidating the IT of its Managed Funds, Health and Life, and Insurance divisions.
Ownership of desktop systems will progressively shift to Axon and be supplied on a rental basis and the deal has incentives for Axon to reduce the total cost of ownership for IT at Tower. Axon will also be involved in IT planning and potentially involved in new uses of IT at Tower.
Axon director Scott Green said the deal is part of a trend to outsource the generic part of a firm's IT.
"It doesn't require specialist knowledge of the financial services market to give a quality service", he said.
Tower has 750 desktop PCs, 130 servers, runs 100 software applications, and will be one of Axon's top five clients. Green said Axon has optimised its service for middle-to-large New Zealand firms with 200-800 users.
Green was cautious about the potential for Axon to parlay the deal into further work for Tower in Australia.
"It's not something involved in the first part of what we are doing on day one," he said.
Axon has 140 staff in New Zealand and a turnover of $50 million. Green said its turnover this year prior to the deal was 15 per cent up on last year. The 17-year-old firm has been offering contract out-sourcing for ten years and it represents 20 per cent of its business, said Green.
