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Responses To Slowing Economy: From Outsourcing IT To Using ASPs

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More and more companies are looking for ways to streamline their information technology departments in reaction to the lagging economy.

John Hancock Financial Services, Boston, has used a number of tactics over the last six to nine months intended to curb the impact of the economic downturn, says Alpa Patel, second vice president, information technology services.

Hancock has developed an extension of its technology information area, called a remote application development facility, in Florida, Patel says.

“We found that with the Boston marketplace, we were having a tough time recruiting and maintaining information technology professionals, so we went down to Florida,” she says. “Everything is less expensive there, the facility is cheaper and weve reduced our reliance on our people in Boston.”

Early in the year, Hancock outsourced maintenance of some of its mainframe applications to India, Patel says.

This move has allowed Hancock to relieve Boston employees of work that is critical to the company, but not necessarily their first choice in terms of responsibilities, and have it done by people working for Hancock in India, Patel says.

This means that the Boston employees who have expertise in life insurance, for example, can focus on that, rather than maintenance of mainframe applications, Patel says. “Now these folks can work on (their area of expertise) and weve been able to drop contractors as well.”

Patel emphasizes that in the efforts to streamline information technology operations, nothing has been taken away from Hancocks Boston employees.

“These are applications that are 15 to 20 years old, so theyre pretty low in value in terms of employees in Boston wanting to do this work,” she says.

Richard Shellito, systems vice president, State Farm Insurance, Bloomington, Ill., says the company is doing more outsourcing “compared to prior years, and assuming a broad definition of outsourcing. We are doing more business with external associates, including partnerships and various levels of outsourcing.

“In the pure sense of saving money due to outsourcing, we do not outsource to save money, but rather to extend capacity,” he says.

State Farm is also saving money “with a more focused approach to preferred vendors and negotiated pricing based on preferred status,” Shellito says.

The company is also using more application service providers.

“We carefully assess each provider to ensure that their solutions can effectively be integrated with State Farms architecture,” Shellito says. “We also follow guidelines to ensure data is secured and protected, both in transit and when stored with an ASP.”

But not everyone is focused on streamlining. Jean Towell, senior public relations consultant for Northwestern Mutual, Milwaukee, says the company is doing just the opposite.

The firm recently announced plans to develop a second major campus to accommodate the companys growth.

Northwestern Mutual plans to acquire 75 acres of primarily undeveloped land in Franklin, Wis., a Milwaukee County suburb.

The company wanted a remote site away from its current headquarters partly to house back-up computer capabilities, according to a recent press release. Currently, most of Northwestern Mutuals computer redundancy is provided on contract through an IBM support center in New York State.

The companys continued growth and expansion into new financial products and services requires more direct control over the risk of computer failure, according to the release.

Reproduced from National Underwriter Life & Health/Financial Services Edition, October 29, 2001. Copyright 2001 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

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