Oxford Health Pulls Plug On Pact, Will Move IT In-house

HMO cancels deal with CSC, expects to reduce costs

By Linda Rosencrance

May 13, 2002 12:00 PM ET

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Computerworld - Less than two years after signing an IT outsourcing agreement with Computer Sciences Corp. (CSC), health maintenance organization Oxford Health Plans Inc. has canceled the deal.

Oxford's agreement with El Segundo, Calif.-based CSC included data center operations, help desk services, desktop systems and network operations and was reported to be worth $270 million to $330 million.

Oxford spokeswoman Deborah Abraham said the Trumbull, Conn.-based health care provider ended the deal last month after determining that it would be more cost-effective to bring the outsourced IT functions back in-house. The business environment as well as the HMO's strategic goals have changed since Oxford signed the agreement in November 2000, she said.

"The original deal was for limited operations," Abraham said. "The company is now entering a growth phase, and bringing these [IT functions] back internally gives us more flexibility to redeploy personnel from one department to another, and will be more cost-effective."

During the outsourcing engagement, Oxford's IT department continued to handle the HMO's application development and maintenance, database administration, quality assurance, program management and architecture. Oxford had hoped to save money and upgrade its technology capabilities through the outsourcing agreement.

Abraham said that most of the workers who had moved from Oxford to CSC as part of the original arrangement would be offered jobs at the HMO. Originally, about 200 employees moved to CSC as part of the outsourcing deal. Abraham said she didn't know how many were still working at CSC.

CSC spokesman Frank Pollare said Oxford didn't end the deal because it was dissatisfied with CSC, adding that the HMO went through a change in management.

Tom Goetzinger, an analyst at research firm Morningstar Inc. in Chicago, said Oxford signed the outsourcing agreement early in its restructuring, but now that the company is experiencing a period of growth like other health insurers, it probably figured it could save money by bringing the outsourced IT functions back in-house.

OXFORD'S OUTSOURCING TIMELINE

Nov. 2000

Oxford Health signs five-year IT outsourcing deal with CSC valued at $270 million to $330 million.

Dec. 2000

Approximately 200 Oxford IT workers move to CSC.

Dec. 2001

Transition process for IT functions was expected to be completed.

April 2002

Oxford ends outsourcing agreement with CSC.

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