Insurance & Technology is part of the Informa Tech Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.

Trading Technology

08:23 AM
Connect Directly

The Changing Face of Consulting

What's in a name? Rebranding and consolidation continue as consulting firms adjust to the changing demands of insurance industry.

Just as we were getting used to the name Accenture, we were notified that PricewaterhouseCoopers Consulting would be called Monday, and Deloitte Consulting would be rebranding as Braxton. Before long Monday mercifullyvanished, as IBM acquired PwC, and most recently KPMG Consulting re-emerged as BearingPoint. While different factors have triggered these changes, all consultancies face a challenge to meet the changing needs and expectations of their insurance clients.

Most recently, it was confirmed that PwC Consulting will form a new global business unit in IBM Global Services, named IBM Business Consulting Services. The unit will be headed by Ginni Rometty, who was IBM global insurance industry general manager in the late '90s. IBM Business Consulting Services will be comprised of more than 30,000 IBM and 30,000 transferring PwC Consulting professionals, forming the world's largest consulting services organization.

The rash of industry changes come as consulting firms that recently enjoyed the benefits of a robust economy and a demand for IT skills that outstripped supply find that the pool of companies looking for IT consulting services has almost dried up. So as Y2K fades into memory and the dot-com boom gave way to the dot-com bust, consultancies have been forced to reorient themselves.

"Many consultants are going through major consolidations just because of where the industry is on the lower end of the spectrum—what I would call the 'body shop side,'" says Jane Landon, CIO, Group Insurance, Prudential Financial (Newark, NJ, $379 billion in assets). A decline in the dollars spent and the number of consultants companies bring on board simply reflects the state of the economy, but things are not likely to return to their previous state when the economy recovers. Accordingly, Landon opines, consulting firms are looking to "move up the food chain in the knowledge value that firms can deliver in the strategy area."

Insurers Look for Something New

But whether that knowledge is really being provided is open to question, says Bill Levine, executive vice president and CIO, AXA Financial (New York, $480.9 billion in assets under management). While prices have dropped and value has been found in offshore outsourcing offerings, "on a domestic basis, I haven't seen a great change in terms of consultants adapting to a new world that we're living in," he says. "In many ways consultants are selling the same things, the same ways they sold them before."

AXA has cut back severely on its use of consulting services, according to Levine, but economic pressures were not the only cause. When Levine arrived at AXA roughly two years ago "the sentiment among my own IT people was, 'Why do consultants get all the good work while we have to maintain all the old systems?'" he says. AXA's IT staff was surveyed after having been accommodated in this respect, and morale was found to be high. That's important, according to Levine, because of the firm's objective of having an IT organization more geared to ownership of its assets. "We have a very robust group and we own all that ourselves. We'll hire consultants if we have to do some grunt work, but we don't transfer ownership to those consultants," Levine adds.

What's needed on the part of consultants is a realization of this proprietary approach to IT on the part of insurance companies, and a creative approach to working with them on that basis, in Levine's view. "The consultants have to take the other role: You work with us, we'll fund it, we'll own it still, and you'll get your system in exchange for giving us your intellectual capital. I think it's that kind of creative thinking that hasn't arrived yet," Levine says.

However, the rebrandings and the acquisitions partially show that the consultants realize that times are changing. Paul McDonnell, the managing director of financial services business unit at then—KPMG Consulting—now BearingPoint—says the challenges of cost reduction and increased efficiency in insurance are "a continuing theme. Consulting firms will need to deliver value in all that they do and they will need to be much more flexible in how they engage," he adds.

Consultants are nevertheless a perennial source of creativity, says Prudential's Landon, specifically the type "you get from having people who have actually seen multiple organizations-you can't get that internally," she argues. There is no substitute for "someone who's had the breadth of walking through many organizations similar to yours."

A kind of compromise is achieved by those carriers, such as Chubb (Warren, NJ, $30.4 billion in assets) and The Hartford (Hartford, $167 billion in assets), that have developed internal consulting companies. The value proposition of Hartford Technology Services Co. (HTSC) to its parent is to "either compete with outside consulting firms, or become part of the team and lower the cost," says Ann Park, director of sales. "Being internal, we don't need to generate a profit, we just need to cover costs."

HTSC also addresses the knowledge transfer concern by acting as an intermediary between outside firms and parts of The Hartford. "We can help manage outside partners and understand how they're interacting with everyone in our company," she says. "We can also bring the knowledge that says, 'Here's how things are done here,'" to help ramp-up and drive initiatives.

Insurers that set up internal consulting units are not the only parties that benefit, according to Park. Consultants that are in outside firms are "getting sick of being on the road all the time, so a value proposition to our prospective employees is: Come here: you still get to work on all the lines of business, but your furthest office is only 20 miles away. We're able to leverage that to get perspective that the other guys have, yet we don't have the huge overhead structure—nor the profit motive."

Anthony O'Donnell has covered technology in the insurance industry since 2000, when he joined the editorial staff of Insurance & Technology. As an editor and reporter for I&T and the InformationWeek Financial Services of TechWeb he has written on all areas of information ... View Full Bio

Register for Insurance & Technology Newsletters