Fireman's Fund terminates CGI outsourcing deal
21 October 2004 | 1134 views | 0
Source: CGI Group Inc
CGI Group Inc. (NYSE: GIB; TSX:GIB.A) (CGI) and Fireman's Fund Insurance Company (FFIC) announced that their Information Technology (IT) Infrastructure Services Contract will be terminated. This decision follows negotiations initiated by FFIC to change the terms of the contract. The termination for convenience is expected to be effective May 1, 2005.
As a result of changes in its business focus, FFIC made the decision to implement a new Information Technology Model. CGI and FFIC had been in discussions to renegotiate the contract to adjust many elements of the existing agreement pertaining to new business requirements and technology changes. Although the original outsourcing agreement was providing FFIC with significant savings, FFIC was seeking further cost reductions as well as major adjustments to several key contract provisions.
"We determined that we could not satisfy FFIC's new requests and at the same time maintain a sustainable and mutually beneficial partnership with our client," said Serge Godin, Chairman and CEO of CGI. "Unfortunately, the contract was already not meeting our profitability standards and we could not achieve a revised agreement that would meet FFIC's requirements while also being in the interests of CGI's shareholders. We will work closely with Fireman's Fund to ensure a smooth transition."
"Our business has evolved over the last few years which led us to implement a new IT model. We would like to thank CGI for its work thus far and to especially thank the hardworking CGI employees who have provided FFIC with quality support these past three years," said Charles Kavitsky, President and CEO of FFIC.
The net impact of the FFIC termination on CGI's order backlog is valued at CDN$200 million. Taking this net impact into account, CGI's backlog at September 30, 2004 was CDN$13.0 billion.