Insurance Broker Discovers It Pays To Outsource IT
All things being equal, it’s better to be big than little. And given their druthers, most folks would rather be big. Age-old aphorisms like “The bigger, the better” and “A good big man will always beat a good little man” lend credence to our preoccupation with and adoration of size. Certainly in business, being big not only has its advantages, it also is a symbol of success. After all, the goal of every business is to grow big, right?
But growth, especially rapid growth, does not come without its challenges-ever heard of “growing pains?”-and managing those challenges can take up a significant amount of a company’s time and expense. Business processes that are important but not a core competency-IT, for example-can become troublesome and distracting. At some point, IT may become too complex to keep in-house. Thomas Rutherfoord, Inc. came to such a realization. And MindSHIFT Technology was its solution.
Growth Can Spawn the Need to Outsource
Thomas Rutherfoord, Inc. is a rapidly expanding insurance broker with six offices located in Virginia and North Carolina. It specializes in providing insurance benefits for companies with employees in the U.S. and overseas; claims and claims management; retirement plans; commercial insurance; surety bonding; risk control; and a host of other products and services.
The company has clients in construction, manufacturing, wholesale and retail, property management, institutional, technology and transportation industries across the U.S. and around the globe. Needless to say, the insurance broker’s IT department was stretched beyond its economic and technical capacity to effectively meet the company’s needs. It needed help.
Part of getting that help was hiring Gerry Shamchuck, Rutherfoord’s vice president of information systems and technology, in effect, the CIO. Having come from a large corporate environment just nine months ago-he had formerly been with CitiGroup-Shamchuck knew the futility of trying to manage the insurance broker’s ever expanding IT needs in-house. It was time to outsource, something in which he had vast experience.
“When I came in, [Rutherfoord] had a traditional situation where an in-house person ran the environment for many years. They were trying to do everything themselves,” Shamchuck recalled. “It’s difficult to maintain competency in all the technical areas that you need: presence on the Web, keeping up with the complexity and diversity of software, and getting the integration expertise you need to keep the plumbing working.” The “plumbing” was the company’s IT infrastructure which, according to Shamchuk, had been neglected for far too long. “I could have either come in, revamp the staff and try to build everything in-house-which would have cost probably more than Rutherfoord’s revenues-or look for an outsourcing partner.”
Finding the Right Partner
Though familiar with outsourcing, Samchuck had never had to procure the services of a managed services provider for a mid-sized company like Rutherfoord. However, he found MindSHIFT, whose business model could best be described by the oxymoronic term mass customization, which means it can deliver a solution that would fit a specific company’s needs but wasn’t so one-of-a-kind that it would be too expensive to execute. Kind of like allowing a client to have its cake and eat it too. And as a lieutenant commander in the Navy reserves, Samchuck had seen firsthand the application of the mass customization model in Navy and Marine Corps Internet projects.
From the outset, MindSHIFT demonstrated superior customer service and a commitment to address the insurance broker’s IT needs with customized solutions. Mike Wheeler, MindSHIFT’S founder and CEO, said he has learned that his company’s goal to provide an IT infrastructure like you would a dial tone or electrical power is a pretty tall order. “Every business has unique applications that need to be considered, migrated and supported,” he said. “I would say that one of the lessons learned for us was to be more inclusive-that the types of applications and the type of support we provide for those applications could be more customized.”
Mike Wheeler believes in forging a partnership with his customers. To his way of thinking, companies who only think about the cost of hardware are misguided. “The reality is, the major cost of technology is in the support and operations component. We really streamline that and become a partner with our customers to allow them to get out of the IT business so they can focus on their end customers.”
The Rutherfoord-MindSHIFT outsourcing partnership is successful because each entity has a clear understanding of what was needed and expected. This is where Gerry Shamchuck’s expertise in negotiating outsourcing agreements was worth its weight in gold. “The scope of work is the main thing,” Shamchuck explained. “So many times, in my experience-I’ve seen it in the public sector and in the private sector-people spend the smallest amount of time on the scope of work: what it is they really want to do.” But if scope of work is sometimes overlooked, cost of work never is, and Shamchuck had to make a case for outsourcing to the other members of Rutherfoord’s brain trust.
What Is the Real Cost?
As Shamchuck sees it, one of the problems with how companies assess the cost of IT outsourcing is that they don’t know how much they are really currently spending on in-house IT. “If the IT support is buried in pieces of salaries because you’ve got people all around the organization that are doing little bits instead of what they are supposed to be doing, sometimes organizations aren’t completely aware of what they are really spending. So sometimes the price tag for outsourcing can look high.”
Other factors also helped Shamchuck finally convince Rutherfoord management that outsourcing IT was a worthwhile investment. Lower risk, for example. MindSHIFT backs up all data every night, which Rutherfoord had never done before. (Under in-house management, data wasn’t backed up 50 percent of the time.) Also, there are continuity-of-business capabilities, which means if IT goes down, MindSHIFT would not only be liable for paying penalties, it would also have to procure services from another vendor until they are back up and functioning again.
Superior maintenance and security is another benefit. The experts at MindSHIFT can maintain Rutherfoord’s extensive Web presence and protect against hackers 24/7. And if any of Rutherfoord’s employees need some technical assistance, MindSHIFT can provide a much larger pool of expertise than the limited staff the company maintained in-house.
Lessons from the Outsourcing Primer:
- Outsourcing of IT is becoming more of a planned business strategy rather than a temporary solution.
- The proper assessment of in-house IT cost can make the ROI of outsourcing much more attractive.
- Pay as much attention to scope of work as you do the cost of the outsourcing during the negotiation process.
About the Author: Ben Trowbridge is an accomplished Outsourcing Consultant with extensive experience in outsourcing and managed services. As a former EY Partner and CEO of Alsbridge, he built successful practices in Transformational Outsourcing, Managed services provider, strategic sourcing, BPO, Cybersecurity Managed Services, and IT Outsourcing. Throughout his career, Ben has advised a broad range of clients on outsourcing and global business services strategy and transactions. As the current CEO of the Outsourcing Center, he provides invaluable insights and guidance to buyers and managed services executives. Contact him at [email protected].