Offloading non-core functions to an outsourcer, and thereby relieving your company of the responsibility of maintaining expensive equipment and escalating personnel costs, is increasingly seen as not only a viable option but in many cases the best or most logical way to go.The Robert Plan Corp. (RPC), an auto insurance carrier and underwriter specializing in urban automotive markets, was facing such a choice several years ago.
The Bethpage, N.Y.-based company's IT department had not kept pace with the times and the company needed to upgrade in order stay competitive and recover a proper return for their IT dollar. The question was whether to outsource their IT functions or rebuild the in-house operation.
"As Robert Plan evolved, its IT department did not," says Mark Biegert, RPC's acting CIO. "We needed some clear direction from management, either from the IT or the business side. As a result, we wound up with a department that, both from a people perspective as well as a technology perspective, was becoming outdated and unable to support business growth. The quickest way to get the business back on its feet was to outsource IT expertise."
Rebuilding from inside, he says, would have been "a much longer road to fruition. And given the size of the organization, we still would have had to pay for certain services. It wouldn't have made sense to have a huge IT department."
After initiating, and then ending, an unsatisfactory two-year relationship with another IT outsourcing firm, RPC decided to expand their relationship with CGI, an IT services vendor based in Canada. The firm was already performing a variety of duties for RPC off-site, so the company decided to make CGI its exclusive IT outsourcing services provider.
"We have been dealing with Robert Plan for the past 12 years," says Serge Wong, CGI's vice president of technology from the company's Boston office. Wong also serves as Robert Plan's account manager.
"We had been putting together applications for them, so they already knew us," explains Wong. "We were doing about 25% of their (IT services). We have about 60 clients in the insurance business, and RPC knew we had the depth of understanding of that business."
A 10-year deal
That depth of understanding lead to a 10-year outsourcing deal to provide customer support, insurance processing, document and IT application management.
Wong describes the resulting contract as "eight inches thick. This really speaks to our mutual long-term commitment to do everything possible to streamline RPC's operations," he says.
Biegert adds that the level of complexity takes RPC's business relationship with CGI to another level. "We have a significant contract with CGI in terms of the breadth of what it covers," he points out. "There are 350 deliverables for CGI to support and maintain. For that to work, a true partnership has to occur."
Among other duties, according to Wong, CGI took over the electronic entry of data functions, taking the chore of uploading information out of the hands of Robert Plan's staff while reducing the error rate through automating the process.
Those 350 deliverables require a 55-member CGI team onsite at RPC headquarters every day.
"We provide all the basic hidden electronic entry of all the data from the insurance," he says. "If you've got assigned risk being transferred from somebody else, we load all the (data) directly into the system so RPC IT people don't have to do that."
CGI also handles the uploading of state-required information to various state Departments of Motor Vehicles and other regulatory bodies.
"There are a lot of regulations, and all (state) governments are involved with this, so you have to stay very close," Wong notes.
"You have to make sure you always meet the legal requirements. Because we have the volume, and have a number of different insurers doing business with CGI, we've developed some programs that can automate the process. Other companies can basically piggyback on this, use these programs to see (changes at) these agencies."
Programs developed to use in complex regulatory environments that vary from state to state are leveraged over CGI's insurance client base, allowing RPC to benefit both from CGI's expertise and the company's mutually shared costs.
"It saves (individual clients) money because we don't have to develop these programs just for them. It supports ten, fifteen, or twenty clients," says Wong. "CGI's knowledge of state-by-state changes in regulations helps those companies that do not have a lot of resources in a particular market stay abreast."
Broad experience a benefit
Biegert agrees, saying RPC's organization benefits from resources and services that CGI's range of clients and broad experience confer.
"We can take advantage not only of what they do for us, but of what they do for other organizations, other insurance companies," he says.
Wong asserts that most insurance carriers need advice on regulatory compliance, something CGI does routinely for its customers.
"We tell them, 'There's a new specific state regulation that will be effective in 30 days and we suggest you take action on this.'" he says. "This is what insurers are looking for. They really want to know if we can provide additional value, not just facilitate programs and transactions on the server."
But both Biegert and Wong stress that the relationship encompasses more than pure IT services. Building trust was the first job CGI had to do, Wong says.
"For the first six months, if a business meeting lasted an hour, fifty minutes of that hour were spent talking about IT. Was the server going to be down? Was the network going to be down? Now they don't even talk about IT anymore. They trust that IT will be there to support them. They can concentrate on their core business and they know they have a partner to back them up. "
Biegert expounds on the importance of communication in such a relationship. "There are always issues that you have to deal with, but compared to what our previous IT environment was like, it's been a significant improvement," he says. "They listen, and they are working to improve the business environment."
The concept of working closely together is so important, in fact, it's built into the actual written agreement between the two firms, adds Biegert. "Within the contract itself it actually states that, on an annual basis, there are to be several IT planning sessions that have to go on to determine what the strategic direction for both companies is going to be over the next two to three years."
Helping the business perform
In the final analysis, however, both companies agree that information technology is a support service and its effectiveness can and should be measured in terms of how it helps the core business functions perform.
Working to improve the business environment, Biegert says, "is what the IT provider should be doing, whether it's internal or external. In a lot of cases you lose sight of that. You think 'we're IT, we're driving the business.' That's the wrong mentality. CGI has the mentality that they're here to support the business. The business people have been very pleased with the end result."
The end result, so far anyway, is a mixed bag of positives. "What CGI brought to us," says Biegert, "are processes that allow us to be more efficient."
Those efficiencies spill forward, especially in light of such a sizable commitment, into notable ROI. Biegert compares it with doing the job in-house.
"We probably, in some cases, could have lowered our costs, but in other cases we would have incurred higher costs. The net effect is that we went from (in-house spending on IT) of $28 million in early 2000 to $16 million (per year with CGI)."
The business community, however, according to Biegert, "is really where you go out and see and measure how well your outsourcing is doing. When you go out and ask 'How's your system support, how's the system running, what's your response time been when you have a problem and communicate with the help desk, how quickly does it get resolved? The business view of how the IT environment has been very positive."
