Following a burst of outsourcing activity within the past few years, there has been a good deal of reflection about the future of the strategy. Experts have speculated about questionable security practices and reliability of providers (especially those offshore), the difficulties of managing outsourcing arrangements and hidden costs that undermine outsourcing's benefits. Outsourcing has also become a more highly charged political issue, with a presidential election coming in November.
These concerns animate a more cautious approach to outsourcing by insurance carriers: Geopolitical threats are real, as is the domestic backlash that could potentially express itself in legislative action or even employee sabotage. But the benefits of outsourcing are just as real, and of greater weight in the balance. Insurance is a risk management industry, and its approach to outsourcing should be consistent with its nature; to paraphrase Celent analyst Craig Weber, quoted in these pages, risks are to be managed, not fled from.
One of the main reasons there is less overt enthusiasm about outsourcing is simply that it has become a mainstream activity. The growth rate of outsourcing use may have diminished, but the growth continues, nonetheless. And as more companies use outsourcing in more ways, both their associated disciplines and providers' offerings grow more mature.
IT outsourcing and - to a lesser extent as yet - business process outsourcing continue to be effective tools for the streamlining of business, conferring not only cost advantages on, but also influencing the effectiveness of, internal IT organizations and the flexibility and change-management capabilities of their businesses.
In this latest installment of Insurance & Technology's Executive Intelligence Series, you will read how insurers are using - or can better use - outsourcing to achieve these benefits, and what is required to deploy an outsourcing strategy in a way that will bring the IT organization to new levels of process efficiency.