Old Mutual fires IT services supplier over cost over-runs and delays

City investment firm dumps IFDS over UK Platform Transformation project and shifts the work to FNZ

City investment firm Old Mutual plc has revealed that it has dumped a technology supplier working on a key development project, claiming mounting problems over the £450m platform upgrade.

In a statement, the asset-management firm, listed on the London Stock Exchange, claimed that it had terminated its contract with International Financial Data Services (IFDS), which had been building its ‘Bluedoor' back-end investment administration platform, and shifted the project to a rival.

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 services company FNZ to install an alternative system in place of the system that IFDS was working on.

In a statement, which comes after a warning over the progress on the system in March, the organisation claims that sticking with IFDS would have entailed "materially greater" costs.

Negotiations between the two companies to "reduce delivery and consequent cost risks" proved fruitless. The organisation claims it exercised termination rights under the terms of its contract with IFDS.

"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 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."

Old Mutual admits that it has already spent £330m on its UK Platform Transformation project out of an anticipated total cost of £450m, but it claims 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. We have made tough decisions today but we believe they are the right decisions for our customers, their advisers, our business and our shareholders," said Old Mutual Wealth CEO Paul Feeney.

The company believes that it will be able to implement the system from FNZ, rather than IFDS, 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 for the UK.

In a statement to Computing, IFDS remained tight-lipped: "We do not comment on current or ex-client business, contractual or commercial arrangements as a matter of policy.

"We can confirm that 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."

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).

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