Offsite But Not Offshore: Promoting a Domestic Outsourcing Alternative

Offshore outsourcing has been both boon and bane to the insurance industry and others owing, on the one hand, to its being a low-cost alternative to domestic services, and on the other hand to its being a low-cost alternative to domestic services. Senior executives and stockholders like the economic benefits that offshore outsourcing provides (which also benefit consumers, of course), but others decry the loss of jobs by American citizens. Insurance CIOs are caught in the middle, having no wish to harm their countrymen (or irritate Lou Dobbs) but bound to diligently seek the most economical solutions available for their employers.American IT professionals and their supporters will probably continue to complain about the offshore outsourcing, and politicians will continue to make the odd populist statement against the practice. But it is hard to imagine that offshore outsourcing will cease to be a part of the IT market for the foreseeable future. However, while offshore will likely continue to be an important sourcing option, some IT industry observers and participants are beginning to push low-cost domestic outsourcing alternatives.

According to the Information Technology Association of America (ITAA; Arlington, Virginia), concern about the United States' long term competitive viability in the IT sector, along with perceived dissatisfaction with outsourcing efforts, led the body to commission an independent study on the global trends for cost effective outsourcing. The goal was, says the ITAA, "to help policy makers, business leaders and others answer the following question-Is there a viable niche opportunity for lower cost domestic (LCD) sourcing?"

One of the key findings of the study, conducted by Conscient Partners, LLC (Palo Alto, Calif.), was that:

The US has a unique opportunity to positively impact the economy by emphasizing jobs and skill sets that enable participation in a global economy and promote cost-effective LCD sourcing. Today the US is still the dominant supplier of IT resources, and remains desirable on every sourcing selection criterion except absolute labor costs. There are many lower cost rural and mid-sized cities that have a talented IT workforce, with colleges and universities eager to collaborate with prospective employers on IT oriented curricula. Thus there are many niche opportunities for both private and public sector entities to utilize LCD destinations to obtain cost-effective IT solutions and delivery.

In its recommendations, the study advocates coordinated efforts between government, industry and academia. Those efforts, the study elaborates, should address workforce-related issues by promoting investment in science, technology and mathematics at every level; by preparing IT professionals with skill sets that will be valued in the future, complementing their technology proficiency with business and people skills; and by fostering the development of programs between IT companies and educational institutions. The study also recommends intensified recruitment of skilled knowledge workers from other geographies and developing skilled professionals from among U.S. military and Baby Boomer retirees.

Among non-workforce focused issues, the study recommends the enactment of policies and the provision of incentives to dramatically increase the speed and availability of broadband-in order to provide essential infrastructure for leveraging the potential domestic workforce-along with an aggressive branding effort for U.S. sourcing, both domestically and abroad.

New Jersey-based consulting firm EWA exemplifies the spirit and some of the recommendations of the study. It's founder and principle, industry veteran Ed Williams-whose CIO credits include Blue Cross Blue Shield of New Jersey (now Horizon BCBS) and American Broadcasting Corporation-believes that America's competitive advantage resides in its students and its trained and skilled retirees.

Both groups are amenable to flexible work schedules and lower pay scales than pre-retired IT professionals with college degrees. Students, particularly at the graduate level, have the requisite skill for many IT tasks typically outsourced, and retired IT professionals have invaluable experience in addition to highly marketable skills. "Combining experience with youth creates a workforce that is unequivocally superior and cost competitive to any other outsourcing options," Williams asserts.

Williams has put the concept to work at EWA's Application Testing Center, located at Syracuse University's CASE Center Incubator, where Syracuse students are currently doing quality assurance work for AXA Equitable.

EWA is currently setting up a program for a major New York City insurer and is also negotiating with a health insurer in upstate New York and a major New Jersey-based carrier. EWA is also working to set up a program at the New Jersey Institute of Technology (NJIT, Newark) identical to the Syracuse University program.

While Williams' concept has a strong element of community service, including a focus on developing minority talent, it is most definitely a for-profit endeavor, and one based on the benefits it provides customers, including a lower risk relationship than offshore partners can offer but within a comparable cost structure. "Our platform can bring up to 50 percent savings because of our scalable pay-usage model," Williams claims.

Posted by Anthony O'Donnell"Combining experience with youth creates a workforce that is unequivocally superior and cost competitive to any other outsourcing options," says Ed Williams, EWA.

Anthony O'Donnell has covered technology in the insurance industry since 2000, when he joined the editorial staff of Insurance & Technology. As an editor and reporter for I&T and the InformationWeek Financial Services of TechWeb he has written on all areas of information ... View Full Bio