Does This Outsourcing Initiative Make Me Look Inefficient?

Ann All

Why are diet aids so popular? It's simple. People want to be skinny without having to exercise or pay any attention to their diets.


Many companies seem to have a similar outlook on outsourcing -- viewing it as a nearly magical way to slim down those bottom lines. Problem is, as with the diet aids, outsourcing doesn't always deliver the hoped-for results.


How many of the companies that report disappointment with outsourcing efforts aren't paying enough attention to vendors or neglecting other management duties? A top-down approach, including an emphasis on contract management and relationship building, is a necessary yet often overlooked step in outsourcing initiatives.


A recent Insurance Networking News article offers an account of Swiss Re, a company that appears to be doing lots of things right when it comes to outsourcing -- including taking the aforementioned top-down approach.


One of its biggest reasons for outsourcing was a need to supplement staff during a period of acquisition-fueled growth, rather than a desire to cut costs by replacing staffers with less expensive third-party resources. This allows Swiss Re to easily scale up or down to match business needs while offering existing staff more stability, says the IT leader of its commercial insurance arm.


About 10 percent of its 175-member IT staff are internal. Some 60 percent work for two different ASPs, and the remaining 30 percent are contractors, according to the article. Internal staffers possess vendor management, project management and other business-oriented skills.


The majority of Swiss Re's contractors are based in India, though some are in Hungary and some in the U.S. Staff in multiple time zones offers "some real economies," the executive says, not to mention 24-hour help desk coverage.


Strategic outsourcing decisions come directly from the C-suite, with the IT department making most of the operational calls, such as selecting contractors.


The executive says that outsourcing has given Swiss Re the ability to run several complicated systems at a lower cost than could be offered internally.

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Apr 25, 2007 10:05 AM Gary M. Zeiss, Esq. Gary M. Zeiss, Esq.  says:
I love Ann's analogy to diet aids... and given the recent Compass report (referred to here http://services.silicon.com/itoutsourcing/0,3800004875,39166873,00.htm and elsewhere), it would seem that all of the weight is gained back - and then some - a few years out.My suspicious nature tells me that the short term budget save (mortgaging the future to meet this quarter's/year's numbers) may be part of what is at play here. A company can save 20-30% off of their budget this year by outsourcing, making their Wall Street promises and keeping their stock prices up. But what about next year? The year after? Probably someone else's problem... Reply

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