Farmers Expands Offshore Operations; Signs Deal With Cognizant

Reflecting the insurance industry's drive to find cheaper alternatives to traditional IT activities, Farmers Insurance Group, a member of Zurich Financial Services, is expanding its already successful offshore outsourcing program. The Los Angeles-based insurer has signed a contract with Cognizant Technology Solutions Corp. (Teaneck, NJ). Under the contract, Cognizant, which has operations in Chennai, Calcutta, Pune and Bangalore, India, will provide a wide range of services, including systems maintenance, software and systems development and staff augmentation.

"We already have a successful offshore strategy with Wipro," a Bangalore-based IT services company, says Cecilia Claudio, senior vice president and chief information officer, Farmers Insurance Group. "Offshore outsourcing has allowed us to reduce cost in IT, allowed our IT staff to do new things, and get them away from mundane tasks," such as legacy systems maintenance. "Cognizant will be able to offer us staff augmentation. In today's market we don't want to have large fixed costs with a large staff," Claudio adds.

Farmers partially decided to form an offshore partnership with Cognizant to help reduce risk. "We wanted our offshore partners to be in a competitive environment so they would not get too comfortable, so we decided to bring in Cognizant," to complement the existing relationship with Wipro, Claudio says. "We went through an extensive RFP process and we started with 10 vendors. I don't know if many of us at Farmers had heard of Cognizant before the RFP process, but Cognizant rose above the competitors." In the current scenario, explains Claudio, Cognizant, Wipro and Farmers' internal IT department will compete for projects based on Farmers' standard ROI/RFP processes.

Currently, no specific projects have been assigned to Cognizant, says Mike Nemeth, vice president and head of the insurance practice, Cognizant. "There will be a wide range of projects with Farmers," he says. "Over time, we expect to have a portfolio of Farmers' projects and the spectrum of technology offerings."

By the end of 2002, Farmers' Claudio expects that 35 to 40 percent of her company's IT work—including maintenance, development work, small enhancements, fixed-price projects and application development—will be done offshore by Cognizant and Wipro.

Greg MacSweeney is editorial director of InformationWeek Financial Services, whose brands include Wall Street & Technology, Bank Systems & Technology, Advanced Trading, and Insurance & Technology. View Full Bio