Tower consolidates HDS outsourcing for "sharper" price, better disaster backup

Disaster recovery key factor in outsourcing decision

Superior disaster recovery was a key factor in a decision by Tower Group to switch its Talisman funds management system from in-house operation to Hosted Data Services, the Auckland and Wellington-based hosting company 49%-owned by Hitachi Data Systems.

“They were able to host Talisman with some savings to us and when we factored in the HDS disaster recovery service, which was better than the one we were currently providing, the decision was made to shift,” says Tower technology manager Ed Saul.

Each element of the financial service company’s work still in-house will be separately assessed to judge the economics of moving it across. “I’d like to see all of it outsourced, but some things might be cheaper for us to run,” especially when migration costs are taken into account, Saul says.

HDS was already running about $5-6 million of work per year for Tower and its new five-year contract will represent about the same amount of income for the hosting company. However, it is now assured for five years at a total of $25m, when the work was previously on shorter-term contracts, typically six to eight months with different Tower companies.

“A number of those were coming up for renewal at the same time,” says Saul, and the group decided to consolidate them. The comparative cost of each workload will actually be slightly less than it was, and the chance of such a deal persuaded the group to approach HDS alone without going to competitive tender.

“It was a case of continuing to do business with a company that has provided us with exceptionally good service [since 1999],” says Saul. “We thought they’d earned the right to first bite. They gave us slightly sharper pricing and in return we gave them a long-term contract.”

Tower might have been able to get a slightly lower price by going to the market, but by the time the cost of moving the workload to another supplier was taken into account, “I doubt that we could have done better,” Saul says.

When HDS set up its datacentre in Albany, Auckland last year, it signalled an intention to pitch particularly for disaster recovery business using that and a similar centre in Tawa, near Wellington (Computerworld, June 2, 2003, page 5).

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