Global IT services company Computer Sciences Corporation (CSC) has lost its biggest local contract, said to make up 90% of its annual revenue.
ITWeb can exclusively report several insiders have confirmed CSC failed to make the final shortlist for the multibillion-rand Old Mutual Group IT infrastructure and maintenance contract.
Market observers believe the impact on the company is likely to be dire, as the Old Mutual Group will, for the first time, adopt a "big bang" approach across all its units to create a single, integrated platform. This initiative has been dubbed "Project ROSA Plus".
"As is well-known, Old Mutual SA, Nedbank and Mutual & Federal are working more closely together. We are doing this so that the group can offer more attractive solutions to our clients, and also to operate more efficiently," the Old Mutual Group said this morning.
"One of the ways we are working more efficiently is by rationalising the group's IT infrastructure, data centres and supporting structures. We are now going through an extensive and careful selection process to find the best end-to-end supplier for these processes."
Two suppliers
While Tess O'Hara, CSC SA's head of marketing communication, said the company was unable to respond to ITWeb's media queries, several sources close to the process confirm the company is no longer in the running.
Instead, T-Systems and IBM are going head to head in the final stages of the closed tender process. The contract is understood to be worth $450 million to $500 million (or upwards of R3 billion) over a five-year period. The deal should be awarded within the next four weeks, and the new incumbent will take over within the next 12 months.
"The first phase is complete, and two suppliers have continued to the next stage of the process. We will not be commenting on any of the suppliers involved in the process, other than to provide the name of the successful supplier when the process is completed," the Old Mutual Group states.
Neither T-Systems nor IBM would comment at this stage, citing company policy and the sensitivity of the process.
Quality of service
However, several insiders believe the Old Mutual Group's decision to seek another IT service provider is based on the quality of service, rather than cost. "Cost can always be negotiated, but it really comes down to experience and ability to provide a certain level of service," says one insider. "This is, obviously, largely based on the past experience that the group has had with the current incumbent."
Meanwhile, the market is speculating about the impact of this move. "This will be a serious blow. CSC has some other clients locally, like Truworths and Woolworths, as well as some offshore BPO clients, but the bulk of their revenue has been Old Mutual," says a source close to the process.
Cape Town-based CSC SA employs 600 staff and is headed up by MD Martin Vergunst. ITWeb yesterday exclusively reported the company sold a 30% equity stake to an empowerment consortium led by Lechabile and Digital IQ Corporation.
Seed capital for the start-up of Lechabile, in 1998, was provided by T-Systems, which retained an 18% stake in the company until recently.
A source close to the BEE transaction said an empowered CSC stands a better chance of winning new contracts and growing its revenue base. "We don't believe any company should depend on one large account."
Related story:
CSC in hush-hush BEE deal
Share