In our recent report on IT Budgets and Projects for 2016, CIOs cited their top challenges as IT operations, talent availability, and budgetary restrictions. How can you address, i.e. move forward on these issues? CIOs indicate that are looking outward and that they will be increasingly using cloud-based services and outsourcing to address these challenges.

Larger carriers project only modest increases in outsourcing. We have noticed over the course of the past few years that insurers are moving to embrace the use of blended/variable staffing rather than expanding traditional Application Development and Maintenance contracts. Outsourced infrastructure management and support services are waning in popularity as more insurers move applications to the cloud. Midsize carriers indicate that they are increasing their use of outsourcing. While these arrangements may seem challenging or uninitiated, services have matured and are not just for pioneers.

Carriers need to find the optimal level of outsourcing for themselves. Balancing cost and capacity benefits against their own abilities to manage external providers is crucial. Insurers who require more flexible cost structures may also consider moving towards variable or blended staffing models. This transfers some risk to the services provider but can reduce administrative overhead for both parties and establish more effective strategic partnerships.

Carriers should be evaluating strategic sourcing and outsourcing services on a regular basis. Remember to look outside for best practices and lessons learned to ease the transition.

This blog entry has been republished with permission from Novarica.

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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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