Gartner’s forecast for 2015 predicts that worldwide IT spending will grow by 2.4 percent and exceed $3.8 trillion. By 2018, spending is expected to exceed $4.1 trillion. Computerworld sees the priorities for IT spend this year being security, cost containment and innovation.
How do these spending forecasts translate for the insurance world?
According to IDC Financial Insights, global insurers are expected to increase their IT spend to over $100 billion in 2015 to boost efficiencies and innovation.
The rapid pace of technical innovation, when coupled with the acceptance and utilization of technology by consumers worldwide, has resulted in a demand for IT services that is unprecedented. The growth in global IT spending of 2.4 percent by itself will not come close to meeting this level of demand.
Many companies run legacy systems and support structures that were not originally designed to meet the flexibility, speed and agility needs of today’s insurance marketplace. Funding for these is categorized as base expenses (keep-the-business-running systems, labor, professional services, equipment and general operating costs). Realizing efficiencies in this space that can be redeployed into new capabilities is a fundamental challenge across the industry.
While base cost optimization involves pulling some of the traditional expense levers like vendor rate negotiations and resource mix improvements, it’s important to keep in mind that beyond those levers, improving and streamlining underlying processes and handoffs not only improves the way a company serves its customers, it also results in lower costs gained through simplification and process improvement.
By examining processes in order to move faster, eliminate defects, and improve timeliness and customer service levels, an IT organization may, as a byproduct, reduce costs and increase quality.
That kind of focused effort that is part of modernizing an operating model can make the difference in not only increased customer satisfaction, but also in the amount of incremental or discretionary funding an IT organization has to use in pursuing the exciting new projects of the future.
This blog entry has been republished with permission.
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The opinions posted in this blog do not necessarily reflect those of Insurance Networking News or SourceMedia.
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