Number of Insurers Outsourcing Some IT Functions Reaches 85 Percent

A survey of insurance industry CIOs on the level of IT outsourcing shows 85 percent currently are using outsourcing firms for some elements of their operation, according to a new report by the research and advisory firm Novarica.

Between 25 and 35 percent of those surveyed also reported plans to increase their level of outsourcing in 2012, according to Matt Josefowicz, partner and managing director for Novarica. “Insurer CIOs across the industry are embracing outsourcing and blended staffing strategies in order to enhance productivity without increasing fixed overhead,” says Josefowicz. “With the imperative to ‘do a lot more with a little more,’ blended sourcing can help insurers stretch their IT resources.” Among the key findings of the report:

85 percent of insurers are using at least some outsourcing services today in either variable staffing/staff augmentation, legacy application maintenance, or data center or infrastructure management.

Large insurers outsource more than 25 percent of their IT work, while small and mid-size companies typically outsource only 15 percent of their IT work.

More than a quarter of large insurers are planning to increase their reliance on outsourcing in variable staffing, legacy application maintenance, and data center/infrastructure.

Midsize and small insurers are half as likely to be planning to increase their usage rates of variable staffing and legacy application maintenance, but are nearly as likely to be planning to increase data center or infrastructure management outsourcing.

Midsize and small insurers are twice as likely to see a high value in data center and infrastructure management outsourcing than larger insurers are. About a third of the respondents intend to increase infrastructure outsourcing, regardless of company size.

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