pay as you go

by John Conley

IT outsourcing has met the punch clock at Canada Life. In an outsourcing industry first, the Toronto-based insurer is outsourcing insurance policy processing to IBM, which is delivered on demand and paid for based on the volume of policies processed.

While the agreement provides the usual benefits of outsourcing, such as freeing Canada Life’s IT department to focus on more strategic issues, it also offers a spending concept linked more closely to the actual work conducted. More importantly, says Doron Cohen, Canada Life’s CIO, the on-demand strategy helps the insurer respond more quickly to industry and competitive pressures. “Traditional outsourcing slows down enhancements to software,” Cohen explains.

“Our service level agreement with IBM requires them to configure the policy processing software quickly to deliver customer service. If we are negotiating with a potential customer that wants us to handle the group benefits of their 7,000 employees that also includes some special dental insurance coverages, the speed by which I can implement their demands will determine whether we win or lose their business.”

IBM’s insurance software package, Genelco, is part and parcel of the technology giant’s new Insurance Solutions Center, which is focused on designing, developing and managing software applications for insurance providers. IBM says the center will help insurers realize cost savings of up to 30%, improve their customer service levels and enhance their software applications capabilities, faster and at lower cost. “We’ve got four other life insurance companies in Canada that are about to follow in Canada Life’s footsteps, buying the software package and paying for servicing based on business metrics like volume,” says Mark Langlois, an executive in IBM’s applications management services division in Toronto.

“We believe the entire e-business on demand strategy will help customers move to a more variable and resilient business model, on a pay as you go basis.” Langlois adds. “We can turn a high-fixed cost environment into a variable cost model that is scalable and run at far higher service levels than customers could do on their own.”

He notes that IBM also is offering the on demand outsourcing model to Canadian governments to manage their call centers traffic. IBM is paid for servicing each completed call.