After Y2K insurers couldn't wait to replace old operatingsystems. They thought it was a race for survival. Nowthat they've survived, the jittery economy has upped the urgencyfor legacy replacement, but carriers struggle to afford theseprojects. Software acquisition costs are a fraction of theirimplementation expense. CIO's need qualified people whosecosts won't overwhelm the benefit. Meanwhile, legacy systemsdon't just disappear.

Offshore outsourcing rates can make the price tag of a longproject not look so bad, but offshore brings communication andcultural barriers. Dramatic time zone differences make theever-popular agile project, which needs proximity of teams,impractical. It's tough to ignore offshore rates, but projects liveon spreadsheets only until they begin, and there are nearshorealternatives.

A study published by Global Services ranks Halifax, Nova Scotiasecond among emerging information technology destinations in NorthAmerica. Nova Scotia hourly rates for senior programmers,technical architects and other lead resources are significantlylower than nearshore rates in the States.

But if all you know about Nova Scotia is the line in a CarlySimon song, you're not alone. It's just an hour from Boston;less than two from New York. Direct flights fly from otherlocations as well, and you won't need a Learjet. Its relativeanonymity is a challenge for Nova Scotia Business Inc., anorganization focused on growing and sustaining the economy of NovaScotia.

One of NSBI's goals is “to establish Nova Scotia as a globalcenter for financial services middle and back office operations byleveraging our technology talent with our insurance expertise,”says J.P. Robicheau, director of financial services and nearshoresolutions for NSBI, “but we need insurance carriers to understandthe outsourcing opportunities we have here.”

Insurance-focused vendors like CGI and Keane. Inc., an NTT DataCompany, have operations in Halifax. They provide resources,agile method expertise, and system staging environments to NorthAmerican carriers. According to Jay MacIsaac, senior vicepresident for CGI's Atlantic Canada, “The Halifax operation beganas an application development and maintenance effort forManulife.” As a result, “we have enormous depth in insuranceknowledge and cover the spectrum for system related projects, frommanagers to developers. We crack the language, culture andinsurance knowledge barrier and we're in the same timezone.”

Chris Donnelly, assistant vice president and chief regulatorycounsel for Manulife, agrees. “We've continued to grow ourresource commitment in Halifax largely due to the quality of staffthere, and through our relationship with CGI,” he said. “TheHalifax team is highly skilled and dedicated to the company. Our turnover is lower there than most places.”

Keane's Halifax Solution Center “provides our clients theability to outsource in stages, so our clients don't need to go sofar away initially,” says John Gillis, director of Canadadelivery. “Carriers get used to operating in an outsourcedsolution. After a few years, they can choose to go offshorefor greater savings.”

Keane also hosts Agile Centers of Excellence in Halifax. These are “the gurus of the agile project method,” saysGillis. “They provide training to companies new todistributed agile teams as well as the resources agilerequires.”

CGI and Keane's Halifax operations are competitive with offshorerates. Gillis describes Keane's as “somewhere in-between theU.S. and offshore.” MacIsaac is quick to caution ratecard comparisons and references the difference between seniorresources in India vs. Halifax.

“We expect more from a senior for time on the job and insuranceunderstanding,” MacIsaac says, “and we're skilled in multipleprogramming languages.” He also believes there is adifference in what an insurer is paying for. “With offshoreyou're typically renting a body; with nearshore you're buying anoutput,,” he says.

BF&M Limited is the holding company for a group of financialservices companies based in Bermuda. John Wight, their CEO,found Nova Scotia accidentally. “In 2004 we needed a backup site tostore data. A consultant recommended Nova Scotia. Sincethat time we've grown to 27 employees working from our Halifaxoffice for system support and application development. Ourpeople are highly motivated, understand insurance and hit theground running.”

BF&M, CGI and Keane worked with NSBI to set up shop in NovaScotia or to facilitate outsourcing deals. What started smallfor each company has grown because of the affordability, work ethicand culture of the resource pool. John Wight sums up theopportunity succinctly. “Whenever we need a technologyresource we ask ourselves, 'what about Nova Scotia?'”