AXA, IBM in $1 Billion On-Demand Pact

Financial services firm AXA Group has awarded IBM a six-year outsourcing contract that includes rolling out “on-demand” computing services for the insurance and money management firm.

The contract is worth an estimated $1 billion, the companies said, and includes a provision to extend the pact if need be.

AXA joins an increasing number of financial services companies, including JP Morgan and Deutsche Bank, that are moving to cut fixed IT costs by adding utility-like computing services to traditional outsourcing contracts.

AXA said it expects to save several hundred million dollars over the length of its contract with IBM.

In this case, IBM is expected to integrate AXA’s server, mainframe and storage systems into an on demand computing structure. One scenario might entail boosting the capacity of AXA’s existing mainframes via an IBM data center where extra capacity is partitioned out on Linux-based servers and “virtualized” on AXA’s mainframe. The pricing on such jobs would vary, an IBM spokesman said, such as by the month, or on even shorter terms such as “by the drink” on a per unit basis.

The contract also calls for AXA to retain full management control of its IT infrastructure with IBM’s help. AXA personnel are expected to work and train with IBM staff at AXA data centers as they design network architecture for the delivery of extra computing services. That might include extra servers added on-site, ready to be “plugged in” as computing demand surges, or “virtualized” capacity delivered from a remote data center operated by IBM.

A key aspect of the outsourcing contract, however, is that AXA will continue to retain its core technology competencies. IBM is expected to provide training to AXA personnel, who are then expected to keep watch over information technology strategy, strategic technology relationships, the development and maintenance of applications and databases and the management of its businesses’ technology portfolios.

On-demand architecture has quickly become a standard in many tech vendors’ menu of utility computing services, including Sun Microsystems and H-P. In a seven-year, outsourcing pact with JP Morgan, IBM is also expected to design architecture — “virtual pools” of capacity — for the bank’s legacy network and data centers that allow rapid scaling upward of computing power, either on-site or from a remote site. IBM Research calls the underlying technology Utility Management Infrastructure (U.M.I.), which is based on open standards, and reflects IBM’s commitment to Linux open source operating systems.

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