Allianz and IBM Set to Enter an Outsourcing Relationship

Alliance, Germany

Allianz and IBM are tied in negotiations regarding outsourcing a significant portion of Allianz’s information technology services hitherto conducted in-house. Allianz, the German insurer company is planning a revamp of its internal IT services, hence the intention to outsource.

Allianz’s integration with cloud technologies

The experts at Allianz have decided to integrate their global data centers and internal networks into an Allianz private cloud. The process understandably is long and is projected to reach completion by the year 2017. Currently the company has atleast 140 data centers. The move to private cloud is rumored cut the data centers to just six from 140.

Allianz hushes up details of the contract

Despite the deal being made public, details about the contract such as the financial aspects were not given to the public. Rumors surrounding the deal claim that Allianz is prepared to invest over hundreds of millions of Euros in order to revamp their IT services.

Misleading newspaper reports

There were several reports in German newspapers in late August about Allianz entering a 10 year contract with an IT outsourcing company. The forerunners for the deal were either IBM or Computer Sciences (CSC). The newspaper held that CSC was the most likely winner of the contract. IBM, however seems to have trumped the competition.

IBM trumped the competition

IBM announced recently that the deal was finally inked and was worth almost $330 million in lieu of its services to help Allianz with technology operations. The agreement spanning seven years instead of the rumored ten year contract is meant to help the Allianz operations within the US. IBM will help Allianz manage their IT footprint with the Allianz Life Insurance and Fireman’s Fund, the North America arms of their company.

The tremors that the contract might cause

Allianz has refused to comment on the effect that the contract will have on their IT employment numbers. CIO with Allianz, Oliver Bussmann was quoted as saying, “By negotiating one contract for both entities, we leverage scale much more effectively.”

IBM spoke about their implementation in a press release. IBM intended to put forth a “single service management framework” that would encompass storage management, data center services, security monitoring and desk-side support, apart from the printing services. This framework would help Allianz streamline and perform operations with an optimal use of resources.

The framework received support from Allianz as well as they agreed that it will reduce nearly 20% of their annual IT infrastructure expenses and bring an operational savings of over $150 million. These numbers were a projection for the next three years.

A history of contracts with IBM

An earlier deal between the Fireman’s Fund and IBM was valued at $130 million. A part of the technological functions were outsourced to IBM through the contract. The addition of the Allianz Life Insurance to the deal translates into the addition of nearly $200 million to the total value of the deal.

IBM climbing the success ladder with profits

The market is getting increasingly competitive. The outsourcing market is especially competitive evidenced by the number of contracts that are renewed or re-inked even before they expire just to avoid a bidding war.

IBM’s outsourcing unit, however seems unfazed by the competition. The Global Technology Services, IBM, posted a 10% profit over the last quarter. The current quarter earnings showed a profit of over $8.8 billion. Apart from the Allianz deal, IBM has signed several new contracts worth a total of over $11.7 billion, 22% more than the total value of signed contracts last year. IBM might be on a profit spree.

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