Friends Provident has signed a 10 year outsourcing deal worth £200 million with IBM to manage its IT requirements and deliver its future infrastructure services.
The life and pension firm expects the deal to generate annual cost savings of around £6 million a year, which is "expected to increase over the term of the contract".
The deal will build on bold plans, outlined in Friends' strategic review in January, to save £40 million over a two-year period. The insurance firm indicated then it would consider alternative sourcing strategies.
According to Friends Provident the deal will save the company money by using shared infrastructure and offshore resources, updating and standardising processes.
The pension firm will also be an early adopter of IBM's cloud computing offering, to receive mainframe capacity on demand.
The contract includes every aspect of the technology infrastructure including software, hardware and services, and will involve the transfer of around 200 Friends employees to IBM and its partners.
Additionally, the contract could lead to a complete hardware refresh, Friends Provident said.
Trevor Matthews, chief executive officer of Friends Provident said: "The cost savings we will realise under this contract will help to make Friends Provident a leaner, fitter and more efficient business without compromising the market leading levels of service we are renowned for."