Old Mutual plc, the FTSE-100 investment firm listed on the London Stock Exchange, has announced that it is tearing up its contract with a technology supplier after spending £330m on a UK Platform Transformation project.
The asset-management firm claimed that it had terminated its contract with International Financial Data Services (IFDS), which had been building its ‘Bluedoor' back-end investment administration platform, as a result of delays and rising costs. The project had been expected to cost £450m. The firm had warned about emerging problems with the project in March.
It has also terminated the company's contract for the associated business process outsourcing and related work it was doing with DST Systems on a front-end system, too.
Instead, Old Mutual has brought in Wellington, New Zealand-based IT software and services company FNZ to implement a platform based on its technology in place of IFDS.
Negotiations over the past month or so between Old Mutual and IFDS to "reduce delivery and consequent cost risks" proved fruitless, Old Mutual claimed. The organisation added that it exercised its termination rights under the terms of its contract with IFDS, and that FNZ's software ought to be cheaper to implement.
"FNZ is a proven platform supplier and outsourcer with an existing, fully functioning UK platform service of significant scale. FNZ has a number of major UK financial institutions as clients," claimed Old Mutual in its statement.
It continued: "These decisions considerably de-risk OMW's [Old Mutual Wealth's] UK Platform Transformation programme. We expect an enhanced customer and adviser proposition supplied by FNZ to be operational for new business by late 2018/early 2019, with migration to follow swiftly thereafter."
However, the statement also implied that Old Mutual may have made, or wanted to make, some changes to the project: "The new platform is expected to provide additional functionality that was not included in the previous arrangements.
"Management estimate this would have cost in excess of a further £50 million and taken a further two years post migration to deliver."
While Old Mutual admits that it has spent £330m on the UK Platform Transformation project out of anticipated total costs of £450m, it claimed that the FNZ system will only cost between £120m and £160m to implement.
That, though, is only a preliminary estimate and the total has yet to be confirmed in the joint planning and configuration phase.
"Given the cost, effort and time already invested in the programme, we have not taken these decisions lightly. This has been a difficult journey for all stakeholders," said Old Mutual Wealth CEO Paul Feeney.
He continued: ""We have made tough decisions today but we believe they are the right decisions for our customers, their advisers, our business and our shareholders."
The company believes that it will be able to implement the system from FNZ more quickly and cost effectively than the IFDS system, because it will be configuring and adopting an existing solution with a single supplier, rather than adapting a system originally developed for the US market.
In a statement to V3, IFDS was tight-lipped: "We do not comment on current or ex-client business, contractual or commercial arrangements as a matter of policy."
However, it rejected the implication from Old Mutual that its systems required extensive adaptation for the UK market: "...our wealth platform and operations are already live and fully implemented with a major UK client supporting a range of products encompassing savings and retirement," it added.
Old Mutual plc is currently in the process of a 'managed separation' of its four businesses from each other - Old Mutual Emerging Markets, Nedbank, Old Mutual Wealth and OM Asset Management (US) - but the platform development ought to be unaffected by this business move, according to the company.
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