Our friends at Celent have one-upped Harding (not to difficult if you've been watching HBO's Boardwalk Empire) with a new report from Donald Light called The New Normal (you can get a summary of it here, but you'll have to pay for the full report).
Fellow Celent analyst, Mike Fitzgerald, joined me at the MajescoMastek user conference this week and touched on the report as part of a panel discussion on transformation through the use of BPO and ITO.
"The world of insurance has fundamentally changed," said Fitzgerald, citing the adjustments all businesses have gone through since the financial collapse in 2008. "We have to adjust and make decisions based on two to three percent growth rather than four to five percent growth."
Fitzgerald predicts BPO will expand for those insurance carriers already using it. He also believes carriers can leverage it as a competitive advantage, but warns that success can come only if carriers "understand why they are doing it."
BPO provider Genpact's Indivar Khosla pointed out the business side in insurance is becoming more demanding post-crisis when it comes to IT expenses, which continue to rise.
"Revenues are down, but IT expenses are up," he said.
The traditional cost savings for labor appear to be going down as well as salaries increase for workers in the traditional offshore outsourcing markets.
So what it comes down to is insurers need to carefully study all their options before committing to or expanding their outsourcing opportunities. Jumping into outsourcing just to save labor costs is not (and never was) a wise decision.
Not only is the cost savings pie-in-the-sky, but the situation could blow up in your face if you don't align yourself with the right partner.
It remains a viable option for carriers--even those new to the party--but the switch has come as insurers turn from using it as a strategic option to one that is more tactical.
As Mike Dufton of MajescoMastek pointed out concerning IT outsourcing: "[Outsourcing] isn't just the technology stacks anymore, it's applications."
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