by Bill Garvey
After Y2K insurers couldn’t wait to replace old operating systems. They thought it was a race for survival. Now that they’ve survived, the jittery economy has upped the urgency for legacy replacement, but carriers struggle to afford these projects. Software acquisition costs are a fraction of their implementation expense. CIO’s need qualified people whose costs won’t overwhelm the benefit. Meanwhile, legacy systems don’t just disappear.
Offshore outsourcing rates can make the price tag of a long project not look so bad, but offshore brings communication and cultural barriers. Dramatic time zone differences make the ever-popular agile project, which needs proximity of teams, impractical. It’s tough to ignore offshore rates, but projects live on spreadsheets only until they begin, and there are nearshore alternatives.
A study published by Global Services ranks Halifax, Nova Scotia second among emerging information technology destinations in North America. Nova Scotia hourly rates for senior programmers, technical architects and other lead resources are significantly lower than nearshore rates in the States. But if all you know about Nova Scotia is the line in a Carly Simon song, you’re not alone. It’s just an hour from Boston; less than two from New York. Direct flights fly from other locations as well, and you won’t need a Learjet. Its relative anonymity is a challenge for Nova Scotia Business Inc., an organization focused on growing and sustaining the economy of Nova Scotia.
One of NSBI’s goals is “to establish Nova Scotia as a global center for financial services middle and back office operations by leveraging our technology talent with our insurance expertise,” says J.P. Robicheau, director of financial services & nearshore solutions for NSBI, “but we need insurance carriers to understand the outsourcing opportunities we have here.”
Insurance-focused vendors like CGI and Keane. Inc., an NTT Data Company, have operations in Halifax. They provide resources, agile method expertise, and system staging environments to North American carriers. According to Jay MacIsaac, Senior Vice President for CGI’s Atlantic Canada, “The Halifax operation began as an application development and maintenance effort for Manulife.” As a result, “we have enormous depth in insurance knowledge and cover the spectrum for system related projects, from managers to developers. We crack the language, culture and insurance knowledge barrier and we’re in the same time zone.”
Chris Donnelly, assistant vice president and chief regulatory counsel for Manulife, agrees. “We’ve continued to grow our resource commitment in Halifax largely due to the quality of staff there, and through our relationship with CGI,” he said. “The Halifax 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 the ability to outsource in stages, so our clients don’t need to go so far away initially,” says John Gillis, director of Canada delivery. “Carriers get used to operating in an outsourced solution. After a few years, they can choose to go offshore for greater savings.”
Keane also hosts Agile Centers of Excellence in Halifax. These are “the gurus of the agile project method,” says Gillis. “They provide training to companies new to distributed agile teams as well as the resources agile requires.”
CGI and Keane’s Halifax operations are competitive with offshore rates. Gillis describes Keane’s as “somewhere in-between the U.S. and offshore.” MacIsaac is quick to caution rate card comparisons and references the difference between senior resources in India vs. Halifax.
“We expect more from a senior for time on the job and insurance understanding,” MacIsaac says, “and we’re skilled in multiple programming languages.” He also believes there is a difference in what an insurer is paying for. “With offshore you’re typically renting a body; with nearshore you’re buying an output,,” he says.
BF&M Limited is the holding company for a group of financial services companies based in Bermuda. John Wight, their CEO, found Nova Scotia accidentally. “In 2004 we needed a backup site to store data. A consultant recommended Nova Scotia. Since that time we’ve grown to 27 employees working from our Halifax office for system support and application development. Our people are highly motivated, understand insurance and hit the ground running.”
BF&M, ManuLife, CGI and Keane worked with NSBI to set up shop in Nova Scotia or to facilitate outsourcing deals. What started small for each company has grown because of the affordability, work ethic and culture of the resource pool. John Wight sums up the opportunity succinctly. “Whenever we need a technology resource we ask ourselves, ‘what about Nova Scotia?'”
Published by PropertyCasualty360, entitled “Nearshore Outsourcing Options Available for Insurers“; republished with permission.
About the author: Bill Garvey has over three decades of insurance operations and IT executive and management experience. Based in Halifax, Nova Scotia, Bill is principal of Eastern Shore Consulting, Inc., which assists insurers in building the business case for legacy system replacement, selecting the best software, and enabling a successful implementation. He can be reached at (902) 457-7350 or visit www.easternshoreconsulting.ca.