We're Doing a Lot More With Less: Is This Sustainable?

Two articles just posted here at INN illustrate the challenge—and opportunities—insurance companies and their IT operations face in the decade ahead.

Bill Kenealy, for one, looked at data from the U.S. Bureau of Labor Statistics, observing that total industry employment stood at 2,177,700 in August, down by more than 2% from more than a year ago, when the numbers stood at 2,233,400 in July 2009.

Yet, many leading companies in the industry continue to see revenue growth this year—in some cases, significantly, as recently reported by INN for 36 companies (see here, here, here, and here for details.

The same paradox seems to be holding true for the IT departments of insurance companies as well. While insurers are spending more on IT, Gartner predicts enterprise IT spending across all industry markets will grow 2.9% in 2010, and surpass $2.4 trillion. The consultancy also sees no pick up in hiring of IT personnel.

So how do companies expect to keep growing while shrinking their overall and IT workforces?

Reliance on information technology will only keep growing, and the need for managers and professionals that know how to employ technology to increase business value will only keep growing as well. The answer, for the long term, is that growth with skeletal workforces isn't sustainable, and more hiring will resume as things pick up. 

But in the meantime, many companies will be able to get a lot of mileage without hiring new workers inside or outside of IT. Here's why:

•    To some degree, IT departments have been victims of their own success. Advanced levels of automation that have been achieved across many processes, including many IT jobs such as database administration and systems maintenance, which have enabled companies to ramp up their activities without hiring new employees.  

•    Outsourcing has become the norm. Not only are insurers outsourcing business processes such as call centers, but thanks to the rise of cloud computing, many IT-related services can be accessed from third parties. Many companies are evolving to a “broker” role, in which outside services are secured and assembled to meet the needs of targeted markets. There may be diminished opportunities in core companies that no longer have as great a need for in-house skills, but at the same time, there will be an explosion of new opportunities among service providers.

•    Workplace roles are shifting: The insurance company coming out of the recent recession has a different make-up than before. The economy will ultimately improve, but the business environment will remain hyper-competitive. There's far more demand for skills that blend business savvy with technology know-how to advance companies within established and new, emerging markets.

Joe McKendrick is an author, consultant, blogger and frequent INN contributor specializing in information technology.

Readers are encouraged to respond to Joe using the “Add Your Comments” box below. He can also be reached at joe@mckendrickresearch.com.

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