IT host wins Tower deal

By ADAM GIFFORD

Financial group Tower has outsourced much of its backroom IT infrastructure to Hosting and Datacentre Services (HdS) in a five-year, $25 million deal.

Chief information officer Ed Saul said it was one more step in the drive for efficiency and productivity that had helped Tower's financial turnaround.

In the six months to March 31, Tower made an after-tax profit of $20.5 million compared with a $154.4 million loss in the corresponding period in 2003.

"Our strategy is to outsource everything we regard as being a commodity, such as hardware and networking, and hold on to those parts where we have intellectual value, such as supporting our core applications," Saul said.

HdS, formed from a management buy-out of Hitachi's New Zealand operation, has been moving its business from selling hardware to providing services, and now gets more than 70 per cent of its revenue from hosting IT infrastructure.

Tower also has a five-year partnership with Axon for desktop and network support, which is worth about $1.2 million a year.

Saul said Tower had made substantial savings right across IT, "not by cutting anything but we have found cleverer ways of doing things and renegotiated contracts. It all contributes to cost savings".

The deal covers Tower's three New Zealand businesses - Tower Managed Funds, Tower Health and Life, and Tower Insurance.

Tower has about 650 staff in New Zealand and 1000 in Australia.

Saul said the plan was to gradually move servers to HdS' Albany data centre, where they would be backed up on its new Wellington data centre for disaster recovery. HdS already maintains Tower's Hitachi mainframes.

Tower is migrating applications off the expensive mainframes, which Saul said was included in the price.

In the life and disability businesses, it is switching to a new application, Talisman, made by local company Tacit. It already uses Talisman in its managed funds business.

It has also commissioned Indian company Tata to build a new fire and general insurance system, Quantum, to run on Hewlett Packard midrange servers. That work started in 1998.

Saul said HsD was chosen on price, skill and cultural fit.

"Both companies share in the risks and rewards. We're both in the same weight division and are equally important to each other," he said.

"A long-term partnership provides significant cost reductions and inbuilt flexibility, and provides HdS with better certainty. It is unlikely that we would get the same outcomes with another organisation."

HdS chief executive Wayne Norrie said hosting was cost-effective because businesses did not have to worry about storage, backup, security, servers and operating systems which were necessary but didn't add value.