Fight for Project Rosa is over

Johannesburg, 11 Oct 2007

Old Mutual and Mutual and Federal have identified a preferred potential supplier for what has been described as one of the biggest ICT outsourcing contracts in the local financial sector.

The companies, part of the Old Mutual Group, said today they will now enter into "a period of contract negotiation, with a view to signing a contract in January 2008".

The five-year Project Rosa, worth R1.5 billion to R2 billion, aimed at identifying and exploiting IT infrastructure and service delivery synergy across the two companies.

"Part of the project has centred on evaluating and selecting an IT infrastructure supplier, as the current OMSA [Old Mutual SA] infrastructure outsourcing agreement with CSC [Computer Sciences Corporation] is approaching its end," the Old Mutual Group says in a statement.

A spokesman for the group this morning declined to name the preferred supplier, saying it would be too early to do so. However, market speculation is that T-Systems pipped incumbent CSC and rival IBM to secure the contract. T-Systems refused to comment.

The project was downscaled in July, due to a decision by the Old Mutual Group not to pursue a group-wide solution. In terms of the new scope, Nedbank - which forms part of the group - will provide its own IT infrastructure and maintenance in-house.

This meant the initial contract value, said to have been about $450 million to $500 million (or upwards of R3 billion), decreased by 40% to 50%. However, at the time, sources close to the project maintained the contract would still be one of the biggest in the sector`s history.

Market observers previously noted that losing the Old Mutual contract could be potentially fatal for US-based CSC`s local operations. The company is understood to have sourced 90% of its local revenue from the Old Mutual deal.

Cape Town-based CSC SA employs 600 staff and recently sold a 30% equity stake to an empowerment consortium led by Lechabile and Digital IQ Corporation. At the time, CSC`s new empowerment partners said its new black empowered status would allow it to widen its revenue sources.