Old Mutual Wealth has ditched its IT supplier, International Financial Data Services, on £450 million platform project.
In the words of Mark Polson (principal of platform consultancy the Lang Cat) "sometimes there really is big news in platforms, and today is one of those days."
The big news It was announced this week that wealth management firm Old Mutual (OM) has terminated its contract with International Financial Data Services (IFDS) for an IT platform upgrade. IFDS had been brought on board to build OM's 'Bluedoor' back-end investment administration platform. The termination came as somewhat of a surprise to the market, given OM's admission that it had already spent £330 million on the project. OM also terminated its contract for the associated business process outsourcing and front-end solution it was working on with DST Systems (DST). In place of IFDS and DST, OM has instructed New Zealand based IT service provider FNZ to install an alternative system by late 2018/early 2019.
The drivers for Old Mutual Earlier this year, it was reported that OM and IFDS had entered into negotiations with the aim of addressing timescale and cost risks. From OM's statement on the termination it is clear that these discussions proved fruitless and it appears that there were three key concerns that drove the decision to terminate:
Cost The wealth management firm stated that the costs of implementation "would have been materially greater" than the figure that they were original advised of by IFDS of "up to £450 million" had they stuck with IFDS.
FNZ have quoted "120 - £160 million" as a preliminary estimate for the installation of the new system. Should this prove to be accurate, then OM will be roughly in line with the original budget.
Delay In addition to costs, Paul Feeney (Chief Executive of OM) made clear that OM wanted to get their platform up and running "within a certain time" and that if they stuck with their "previous supplier that this was likely to run over."
Functionality Linked to the above but beyond the inconvenience of increased costs and delay is the issue of functionality. OM stated that "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." These additional functions are claimed to be "giving customers the option to tap into investment trusts, exchange traded funds (ETFs) and junior Isas, which was not immediately possible with IFDS."
Overall, Paul Feeney set out that OM "have made a definitive decision… and one that will provide greater functionality within an earlier time and at a better cost than would have been the case had we stayed on the route we were on.”
Whilst IT projects go wrong, it is unusual for them to fail this publically. It will be interesting to watch the fall out as we find out what actually went wrong and whether the parties have an appetite for litigation.