Insurers continue to hire internal technology professionals, according to executive search firm the Ward Group, but they haven’t stop contracting with consultants for professional services. In fact, the number of consulting engagements, which increased by 40 percent since 2007, is expected to continue rising, according to Ward Group director Leah Hollstegge.
But what drives IT executives to outside companies and what can they do to ensure a successful working relationship?
Those were the questions asked of a mixed group of insurance technology executives and service company leaders who took part in a roundtable discussion, titled “Strengthening Your Core: Leave the Consulting to the Consultants,” on Tuesday at the CIO/CTO Roundtable during IASA Educational Conference and Business Show in Washington DC.
The panel members were Victor Carneiro, VP of IT and CIO at compensation insurance carrier CompuSource Oklahoma; Ernie Pearson, IT director of applications development at Secura Insurance; Ryan Savage, CTO of financial services at CSC; and William Freitag, CEO of management consultancy Agile Technologies. Ward Group’s Hollstegge also joined the panel, which was moderated by Michael Foerst, VP of IT at Midwest Employers Casualty Co., and an Insurance Networking News editorial advisory board member.
What follows are three of the questions Foerst put to the panel and selected comments from the panelists:
What drives companies to hire third parties?
CompuSource Oklahoma’s Carneiro said it’s the shortage of skilled professionals. There are fewer people going into IT, he said, and in a battle for talent companies may find they can’t offer the same salaries as some deep-pocket competitors. So, he says, “It makes sense … to go outside”
Agile Technologies’ Freitag added that when clients engage his company it’s because they can’t afford to develop the skills in-house. And a big project might demand more IT professionals than a company has on staff.
Pearson, the IT director at Secura Insurance, says that as companies like his tend to buy, as opposed to develop, information systems, they don’t have the specific computer language, database, and other skills needed to support a particular vendor’s products.
CSC’s Ryan, however, said it often comes down to speed. Businesses need to get through a technology transition as quickly as they can to get on to the next set of challenges.
What is the biggest mistake IT executives make when contracting with a professional service firm?
Freitag, from Agile Technologies, says problems arise when a contract between the client and the contractor doesn’t match what needs to be accomplished. He said contracts need to be done in a way that everyone’s expectations are met. In a long-term partnership, he said, you want everyone to win.
Ryan agreed that it’s the relationship that makes the different in a successful team effort.
And Pearson said that if IT executives run into problems and have to start referring to the contract, they’ve already lost. Be careful with incentives and penalties, he said, and always be careful not to constrain either party. Also make sure both parties have some skin in the game, he advised.
What is the key to success?
Here, each of the panelists summed up their thoughts in concise statements:
Said Secure Insurance’s Pearson: Clearly articulate the direction you want to go and have a shared outcome.
Said Agile Technologies’ Freitag: Make sure there’s a cultural fit between the business hiring the contractor and the contractor.
Said CompuSource Oklahoma’s Carneiro: Be clear on the directions you give the consultant. And make sure you have good project management.
But for CSC’s Ryan, it all comes down to one word: “Trust.” Sometimes during a project, the IT executive might not be aware of where a given technology is going. And, at that point, you need to trust that the consultant is going to take you where you need to go, he said.
