The current economic slowdown has once again forced managers to examine expenses, and reducing staffing levels often is a quick fix for a much larger problem. Rather than examining ways to cut waste, inefficiencies and discretionary spending, some executives believe that reducing payroll is the best way to shore up their company's bottom line.The insurance industry, many experts believe, is employing far too many IT workers, primarily programmers, to justify the amount of money being spent on building and maintaining their technology infrastructures. The industry combined is employing 144,400 technology workers, including about 31,000 programmers, according to TowerGroup, which compiled statistics from the U.S. Bureau of Labor Statistics and the Insurance Information Institute. The banking industry, in comparison, employs 91,170 IT workers, including 15,630 programmers.
How does IT staffing in the insurance industry compare with other industries? A recent study by GartnerGroup determined that for all industries surveyed, there are 17 employees for every one IT staffer. However, among carriers, that number dips to 8.6 workers per IT staffer. In 2001, insurers on average will spend $17,666 on technology for each employee, versus $7,875 for all industries, according to GartnerGroup.
Most experts agree that carriers need to shift more of their IT budgets to purchasing packaged software and to outsourcing functions that don't provide them with a competitive advantage. The banking industry adopted this strategy years ago when financial institutions began outsourcing check processing and ATM maintenance. More importantly, bank executives understood that they could not afford to continue to develop proprietary software and instead shifted to packaged solutions.
No one is predicting that thousands of IT workers will be handed pink slips in the next 18 months, and few advocate that approach. "Indiscriminate cutting (of) IT budgets in reaction to economic uncertainty will cause more long-term harm to the enterprise than the slowdown in the demand for enterprise products and services," warns GartnerGroup. Instead, the report suggests that IT spending caps "may be prudent should economic uncertainty become a self-fulfilling prophecy."
Carriers say they are redeploying and retraining IT staffers to reflect the growth of e-business and other initiatives. Some carriers have cut IT staffing, but experts say those efforts have been too little and much to late. Insurers have some difficult decisions to make in the near future, decisions that will influence how well they implement technology.
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