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Research report reveals surprising results -- Perception of outsourcing does not reflect reality
Insurance providers experience huge benefits as a result of IT and business process outsourcing
London, UK, May 1, 2002 -
New research reveals that Insurance companies who are using either IT
or business process outsourcing (BPO) are gaining significant business
benefits. However, the findings also show a surprising lack of understanding
amongst those insurers with no experience of outsourcing.
The report, Issues Affecting IT Deployment in
the UK Insurance Sector, was commissioned by leading IT services
provider CGI Group Europe Ltd. (CGI) The research was carried out in March
2002, by independent research company Metrica, with 100 major UK-based
general insurance and life & pension companies both by telephone and
face-to-face interviews.
Of the 26 respondents who use IT outsourcing 105 positive remarks were
made about its benefits. A similar proportion was found for BPO. This
is an overwhelming endorsement for both kinds of outsourcing.
Of the advantages highlighted by insurers, flexibility is seen as a key
benefit by 100% of the respondents using BPO and by 96% of those using
IT outsourcing. Making the organisation more cost-effective is highlighted
as a benefit by 95% of BPO users and 88% for IT outsourcing. Other benefits
include making organisations more competitive, the need for less capital
investment and helping organisations to cut costs.
Gavin Chapman, managing director of CGI Group Europe Ltd comments, “A
significant finding for us was the low level of knowledge on outsourcing.
When the whole sample was asked in which areas of the business they considered
outsourcing to be most effective a surprising 50% said they did not expect
BPO to be effective at all and 35% stated the same for IT outsourcing.”
“When this is compared to the actual advantages experienced from
those that have used outsourcing, we can assume this finding comes from
the insurers that have no experience of it themselves. In fact, quality
of service was mentioned as a concern in the introduction of outsourcing,
yet it is not an issue for those insurers that have experienced it. This
shows a fear of the unknown. We are certain that if insurers were to look
more closely at the benefits which outsourcing brings the industry, they
would appreciate its role in helping them survive during these turbulent
times.”
The key problem with IT outsourcing cited by respondants, and to a lesser
extent BPO, is the difficulty in managing the process. This is not necessarily
a barrier to outsourcing as the advantages far outweigh the negatives.
However it highlights the need for more effective skills in this area.
In the qualitative interviews one respondant claims, “Management
of outsourcing requires that you either need to develop your internal
skills or hire specialists that are familiar with managing the procurement.
This is not a barrier if the economics and business case is made.”
Chapman agrees, “Insurance organisations must ensure that they dedicate
ongoing resources to interface with the service provider and focus on
making the partnership work for both parties. Each outsourcing contract
is unique and insurers should start as they mean to go on by looking for
providers that are specialists in the business, with flexible contracts
that will take into account business change -- and providers that are
willing to share risk and reward.”
Chapman continues, “It was interesting to see the views on BPO.
There are clearly some negative feelings out there towards the take-up
of BPO even though the high level of benefits experienced by users is
remarkable. As a fairly new phenomenon insurers are obviously more hesitant
to move forward with BPO, but this research eradicates any myths that
surround it -- the report clearly shows that it brings significant advantages
to organisations.”
The report also looked at off-shore outsourcing and found that 75% of
all the insurers interviewed have not even considered it and only 17%
currently use off-shore outsourcing. Chapman comments, “This is a
surprising finding, as in our experience we have found this to be higher.
However there could be some confusion over what is meant by off-shore
outsourcing. The report shows that most respondants refer to India when
they discuss off-shore. –Whilst India offers some excellent examples
of off-shore outsourcing, it is possible that they do not realise off-shore
can also refer to a whole host of other countries. Whichever way this
is perceived, there is obviously a need for education in the marketplace
on off-shore outsourcing.”
Copies of the research report, Issues
Affecting IT Deployment in the UK Insurance Sector, can be obtained
by contacting Emma Howell on 01438 317966 or emma.howell@cgi.com.
About CGI
Founded in 1976, CGI is the fourth largest independent information technology
services firm in North America, based on its headcount of 13,700 professionals.
CGI’s annualized revenue run-rate totals CDN$2.1 billion (US$1.3
billion). CGI’s order backlog currently totals CDN$10.7 billion (US$6.7
billion). CGI provides end-to-end IT services and business solutions to
more than 3,000 clients worldwide from more than 60 offices. CGI’s
shares are listed on the TSX (GIB.A) and the NYSE (GIB). They are included
in the TSX 100 Composite Index as well as the S&P/TSX Canadian Information
Technology and Canadian MidCap Indices. Website: www.cgi.com.
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