No. Records Request



No. Records Request

1 583 OUTSOURCING

2 3549 DECISION

* 3 6 OUTSOURCING DECISION

Record 1 of 6 - ABI/Inform with Fulltext 1/95-8/95

TI: 3 questions hold key to outsourcing decision

AU: Makson-Stan

SO: National-Underwriter-Property-and-Casualty/Risk-and-Benefits-Management. Jun 5, 1995; v99n23, pp. 20,39 [2 pages]

IS: 1042-6841

PY: 1995

AV: Fulltext online. Photocopy available from ABI/INFORM 2017.00

RN: B-NUN-61-26

AB: Before outsourcing non-core functions, insurers should ask themselves: 1. whether they are performing the function more effectively and efficiently than someone else can perform it for them, 2. whether they really have the human resources and capital to support the growing demand for back-office services, and 3. whether there is some competitive advantage they derive from tying up resources in non-core functions.

CC: United-States (9190); Insurance-industry (8200); Data-processing-management (5220)

DE: Outsourcing-; Insurance-industry; Decision-making; Systems-management

GE: US

PN: National-Underwriter-Property-and-Casualty-Risk-and-Benefits-Management

PC: NUN

NW: 710

TX:

There's probably not a major insurance company today that hasn't heard the term "outsourcing."

Many are already utilizing outsourcing services to handle one or more of their back-office functions.

And for good reason. By outsourcing certain non-core functions, firms are realizing productivity increases averaging 50 percent and labor cost reductions of 30 percent or more, not to mention significant increases in the quality level of those services.

Should your company be farming out non-core services such as billing?

The answer lies in effectively asking and answering three key questions.

1. "Are we performing this non-core function more effectively and efficiently than somebody else can perform it for us?"

Take a look at your billing. Cycles are variable, for some customers it is monthly, for others quarterly and for others annually.

As a result, the internal billing function is alternately understaffed or overstaffed.

One week, perhaps 60,000 statements will be mailed out; the following week, that figure may drop to 15,000.

One week, 100,000 checks may arrive, the following week, 20,000. And your people are either overtaxed or underutilized.

Savvy managers may ask whether they can really justify the cost of maintaining a full staff to handle heavy billing periods, while that same staff remains idle during lighter billing periods.

With a simple payment formula based on per-unit cost, outsourcing the billing can remove a back-office headache and allow your people to dedicate their time and effort to core business functions.

So ask yourself, "How effective and efficient are my efforts in printing and mailing statements In processing customer payments? In printing and disbursing checks?"

2. "Do we really have the manpower and capital to support the growing demand on back-office services?"

This question is becoming increasingly significant as the industry continues to grow.

These times are generally good for insurers. Customers lists and policy volume are growing. And with them, so is the demand on in-house statement processing and remittance management operations.

There are two ways to keep up.

One, invest more people and capital in these functions to handle the ever-increasing flow of billing. Of course, a good deal of that capital will be invested in equipment.

Technology keeps marching on, and if you're to enjoy the same bottom-line advantages that state-of-the-art processing hardware is providing your competitors, a significant capital outlay may be in order.

Option two is to turn a major outsourcer whose primary business is to process and disseminate statements, manage remittances, and print and disburse checks.

And since these services comprise an outsourcer's core business, you can be certain that they'll be equipped with the latest, most technologically advanced hardware.

A key query thus becomes, "What level of personnel, equipment and capital are we now using to support our in-house back-office chores And how much more are we willing to invest?"

3. "Is there some competitive advantage that this company derives from tying up our resources in non-core functions?"

Here's perhaps the most significant issue, and one that prompts managers to invert their traditional thinking.

The conventional query has been, "What advantages do we derive from farming out our billing?"

Increasingly, though, that question is being turned around, to "What advantages are there in keeping non-core functions in-house"

So, what should you look for in, say, a billing outsourcer? High-powered productivity. Scrupulous attention to detail. Fast turnaround times. Superior accuracy ratios.

How about size Let's say the outsourcing operation should be big enough to process 250 million statements and over a billion inserts a year.

Your outsourcer should house an on-site U.S. Postal Service to keep millions of mailings flowing smoothly.

It should have not only the latest printing, inserting and sorting equipment, but also state-of-the-art sorting software, all of which helps manage mailing costs by leveraging optimum mailing discounts and volume efficiencies.

A top-notch outsourcer should also be creative, finding ways to make your billings work harder.

Your statements, for example, can serve as a self-contained marketing tool by including targeted promotional messaging.

And superior outsourcing companies should store detailed transaction information on-line-automatically microfilming and imprinting for a comprehensive audit trail-for a year or more, depending on your requirements.

And the best outsourcers make security a science. Using co-mingling and other proven techniques, fraud is minimized, and the integrity of your portfolio is protected.

CR: Copyright National Underwriter 1995

AN: 1045761

--------------------------------------------------------------------------------

AN: 1045653

--------------------------------------------------------------------------------

Record 3 of 6 - ABI/Inform with Fulltext 1/95-8/95

TI: Outsourcing maintenance: Making the right decisions for the right reasons

AU: Yi-Sunny

SO: Plant-Engineering. May 8, 1995; v49n6, pp. 156,152 [2 pages]

IS: 0032-082X

PY: 1995

AV: Photocopy available from ABI/INFORM 168.00

RN: NO

AB: Thanks to heightened interest in management theories from Japan and downsizing pressure from top management, maintenance is experiencing dramatic, fundamental changes in structure. In addition to downsizing the workforce, many maintenance managers must also reduce total maintenance costs. Outsourcing has become a popular option. Specialization and economies of scale often give outside shops a cost advantage. Economic downsizing has produced a larger temporary workforce. Finally, outside shops can yield higher productivity because of flexible work rules and regulations. Making outsourcing decisions requires deeper analysis than most people realize. Because there is only a handful of fully integrated one-stop shops in the country today, outsourcing is done on a piecemeal basis. A core competency model, which can be used in outsourcing decision making, is described.

SF: Graphs

CC: Maintenance-management (5130); United-States (9190)

DE: Outsourcing-; Maintenance-management; Decision-making; Criteria-

GE: US

PN: Plant-Engineering

CD: PLENAV

PC: PLG

AN: 1025705

--------------------------------------------------------------------------------

Record 4 of 6 - ABI/Inform with Fulltext 1/95-8/95

TI: Decisions to outsource information systems functions: Testing a strategy-theoretic discrepancy model

AU: Teng-James-T-C; Cheon-Myun-Joong; Grover-Varun

SO: Decision-Sciences. Jan/Feb 1995; v26n1, pp. 75-103 [29 pages]

IS: 0011-7315

PY: 1995

AV: Photocopy available from ABI/INFORM 13439.00

RN: B-DSI-36-4

AB: In recent years, the decision to outsource information systems (IS) functions has become a viable strategic alternative in managing increasingly complex IS functions. In a study, the IS outsourcing phenomenon is conceptualized as a strategic decision in the organization. Drawing on resource-based theories, resource dependence theories, and other theories of strategic management, a discrepancy model of this decision is developed. Relationships between a number of strategy-theoretic factors and the IS outsourcing decision are hypothesized. These factors include IS resource performance discrepancies manifested in the form of gaps in information quality, IS support quality, IS cost effectiveness and financial performance, as well as the strategic orientation of the firm. Results indicate that, while cost consideration and the firm's financial performance are not associated with the IS outsourcing decision, difficulties in providing good information outputs and IS support services are associated with the decision.

SF: Charts; Appendix; Equations; References

CC: United-States (9190); Experimental-theoretical-treatment (9130); Management-science-operations-research (2600); Data-processing-management (5220)

DE: Information-systems; Outsourcing-; Strategic-planning; Decision-making-models; Studies-; Statistical-analysis

GE: US

PN: Decision-Sciences

CD: DESCDQ

PC: DSI

AN: 1020469

--------------------------------------------------------------------------------

Record 5 of 6 - ABI/Inform with Fulltext 1/95-8/95

TI: Read elsewhere ... Outsourcing: The debate continues

AU: Anonymous

SO: Tax-Executive. Mar/Apr 1995; v47n2, pp. 95-96 [2 pages]

IS: 0040-0025

PY: 1995

AV: Fulltext online. Photocopy available from ABI/INFORM 6327.00

RN: NO

AB: The January 1995 issue of CFO Magazine contained an article entitled Outsource Taxes? Why Not? The article quoted a number of proponents of outsourcing, including Dennis Torkko of Arthur Andersen LLP, John Hopkins of Coopers & Lybrand LLP, and Richard Brooks of J. H. Cohn & Co. Two TEI members and a member of the TEI's staff were also quoted in the article. The article states that TEI cautioned against making any outsourcing decision in haste, without the full participation of in-house tax personnel. TEI has secured commitments from all the Big 6 accounting firms that they will not bypass the tax department in seeking outsourcing engagements.

CC: United-States (9190); Institutional-taxation (4210); Professional-services-not-elsewhere-classified-used-from-1989-forward (8305); Non-profit-institutions (9540)

DE: Associations-; Corporate-taxes; Big-Six-accounting-firms; Outsourcing-

GE: US

CO: Tax-Executives-Institute

PN: Tax-Executive

PC: TXE

NW: 1008

TX:

The January 1995 issue of CFO Magazine contained a provocative article entitled "Outsource Taxes? Why Not?" The article quoted a number of proponents of outsourcing, including Dennis Torkko of Arthur Andersen LLP, John Hopkins of Coopers & Lybrand LLP, and Richard Brooks of J.H. Cohn & Co. Mr. Brooks threw down the gauntlet with this gem:

There really isn't any justification for having full-time staff people do compliance work in most cases.

According to the article, Mr. Brooks believes that "hiring full-time employees to do compliance work, which is seasonal, is making what should be a variable cost for a corporation into a fixed cost."

Two TEI members and a member of the Institute's staff were also quoted in the article. Timothy J. McCormally, TEI's General Counsel, is quoted as observing--though the article says "admitting"--that "there may well be situations where a company can strategically employ outsourcing to its benefit," such as the preparation and filing of expatriate tax returns. He later said that-

[TEI has] worked hard to show that in-house people bring something special to the table. Their close identity with the company and their intricate knowledge of how the company operates are things that may not be present with an outsourcing arrangement.

The article states that TEI cautioned against making any outsourcing decision in haste, without the full participation of in-house tax personnel:

We'd like to see outsourcing firms adopt a process that enables a company to make an informed judgment, rather than dangling a loss-leadertype fee in front of management in order to short-cut its analysis and make a precipitous decision to outsource.

In fact, TEI has secured commitments from all of the Big 6 accounting firms that they will not bypass the tax department in seeking outsourcing engagements, and has followed up with the firms where it appears the commitment has not been honored. (Editor's Note: If members are aware of any such situations, they should contact TEI Executive Director Mike Murphy.)

One of the more prominent outsourcing engagements in recent years involved BP America, and the author of the CFO article talked with the company's general tax counsel, E. Wayne Tanner, who is a member of TEI's Cleveland Chapter. (TEI's Corporate Tax Management Committee has sponsored conference sessions featuring presentations by other TEI members from BP America.) In the CFO article, Mr. Tanner explained that the company's decision to outsource its income tax compliance work:

We were looking at whether we could get that piece of the work done more cheaply than we were getting it done internally, and we felt we achieved that in the outsourcing....

[In addition, by using] a large national public accounting firm, we felt that perhaps we would get more ideas out of that group because they have a large range of clients and a broader range of knowledge about the tax area....

We felt that outsourcing this way could allow the BP tax managers to concentrate on more value-added and tax advisory work.

Joseph I. Hitter of Mead Corp., a member of TEI's Cincinnati Chapter, was also interviewed in connection with the CFO article. According to the article, Mead "took a hard look at all the functions of its tax department, and in 1992, tied price tags to them as part of a rightsizing effort." The company then asked its outside accounting firm to bid on the functions, but according to Mr. Hitter, the firm couldn't match the in-house cost of those functions. Mead, however, did decide to outsource its payroll function. Mr. Hitter is cited as saying the decision was tied not so much to the cost savings accruing from reducing personnel, but to the improved service that the outside firm would provide.

The CFO article has raised (again) the profile of the tax outsourcing debate. At least one TEI member--Bruce H. Barnett of the Minnesota Chapter--learned of the article from his boss, who forwarded the article to him with a note saying the equivalent of "Should we be thinking about this?"

Clearly, Mr. Barnett has done a lot of thinking about the subject, which shines through in the following reflections he sent to The Tax Executive:

First, the corporate tax director must objectively consider outsourcing possibilities. It is a mistake, and, ultimately counterproductive, to ignore it. This "ostrich" approach will fail because someone will eventually raise the possibility. If not the tax director, it likely will come through the chief financial officer. By that time, perceptions, whether correct or not, will have formed.

A variation of the ostrich approach is to skew the outsourcing analysis. This approach not only is a breach of duty but is, in my view, futile since the truth will eventually surface. Moreover, it creates a false security which could delay the actions needed to improve performance which, ultimately, is the goal.

Second, I do not believe that there is a bright line between planning and compliance in many of the activities of a corporate tax department. To me, tax professionals performing compliance functions are among those best placed to substantially contribute to the corporation's bottom line through the generation of tax savings ideas. Those closest to the numbers often are well positioned to see opportunities. To think that the compliance function does not and cannot add significant value, in my view, is erroneous.

Third, benchmarking is important. To win, one must be competitive. If the possibilities are not understood, opportunities to be competitive are missed and the chances of failing increase. Benchmarking enables the tax department to cure the perceived outsourcing advantages of efficiency and effectiveness. The tax department must be seen as more efficient and effective than any outside service provider. If it is, the value of outsourcing is substantially eroded, if not eliminated.

The Tax Executive invites other views on outsourcing and other key tax management issues.

(Editor's Note: Copies of the January 1995 issue of CFO Magazine may be obtained by writing CFO Publishing Corp., 253 Summer Street, Boston, Massachusetts 02210. Because of copyright restrictions, The Tax Executive cannot fulfill requests for copies of the article.)

CR: Copyright Tax Executives Institute Inc 1995

AN: 1009196

--------------------------------------------------------------------------------

Record 6 of 6 - ABI/Inform with Fulltext 1/95-8/95

TI: 10 things to consider before making an outsourcing decision

AU: Golden-Kathleen

SO: Insurance-and-Technology. Feb 1995; v20n2, pp. 38-39 [2 pages]

IS: 0892-8533

PY: 1995

AV: Fulltext online. Photocopy available from ABI/INFORM 14954.04

RN: NO

AB: The benefits and disadvantages of outsourcing data processing activity, including cost savings, returning the business focus to core functions and potential head count reduction, may seem obvious; however, misconceptions abound about outsourcing, experts say, which could lead those in the insurance industry to make the wrong decision. Some considerations that should be part of the thought process when considering outsourcing are presented: 1. Understand the reason that outsourcing is being considered. 2. Understand the scope of the project. 3. Perform a benchmark. 4. Do not hand out extra money. 5. Write an appropriate RFP. 6. Allow the in-house IS department to respond to the RFP. 7. Realize that outsourcing comes in many shapes and sizes. 8. Look for shorter contract terms. 9. Avoid the "married for money" syndrome. 10. Consider who is in control.

CC: United-States (9190); Insurance-industry (8200); Data-processing-management (5220)

DE: Insurance-industry; Data-processing; Outsourcing-; Recommendations-

GE: US

PN: Insurance-and-Technology

PC: IIN

NW: 1463

TX:

With such high-profile announcements in recent months as Mutual Life Insurance Company of New York's decision to outsource maintenance of its legacy systems to Computer Sciences Corporation, and Royal Insurance's agreement to outsource its data center to Genix, a spotlight has been thrown on the insurance industry's practice of outsourcing some or all data processing activity to a third party. The benefits and disadvantages, including cost savings, returning the business focus to core functions, and potential head count reduction, may seem obvious. But what you have heard about outsourcing may not be all you need to know. Misconceptions abound about outsourcing, experts say, which could lead you to make the wrong decision. In the interest of avoiding costly mistakes, here are some considerations that should be part of the thought process when deciding whether outsourcing is right for your organization.

1 Understand why you're considering outsourcing

Determining the objective of outsourcing should come long before even the request for proposal (RFP) is written. Is it an accounting objective? Is it a corporate mandate to reduce staffing? Are you dealing with an insurmountable management problem? Maybe it's a combination of factors. But according to John Thomas, vice president, sales and marketing, for consultant Compass America, "You have to ask what management hopes to accomplish" before you can solve the problem, because outsourcing may not necessarily be the answer.

2 Understand the scope of the project

Not only should you ask yourself what you're doing, you need to ask also who is going to be involved and affected. Is the project going to encompass all of IS? Is it a particular group, department or function such as applications development or maintenance of legacy systems? By understanding who in the company will be affected, you can plan for the redistribution of jobs. Suggesting that the human resource factor is closely watched by all of a company's employees, Alan Cook, senior vice president, operations, at Jackson National Life (Lansing, MI), which currently outsources the bulk of its computer support, says, "You need to do everything possible to look after the staff, because the rest of the organization is looking to see how those people are treated."

While some loss of staff may be inevitable, especially if reducing headcount is one of the objectives of the project, some observers suggest that the career path of former IS staff members may be better after they leave the firm. "People who are in the IS function within an insurance company are not in the mainstream, like the underwriters or actuaries," says Irwin Kelson, president and founder of Professional Partners (Howell, NJ), an outsourcing firm serving the property/casualty sector. "Looking at their long-term career path, if they move from that situation to an outsourcer, where their primary function is IS, then they become part of the mainstream." According to Dave Miller, division vice president of Electronic Data Systems (EDS, Plano, TX), in excess of 30 percent of its 78,000 employees are workers who made a transition from the firm that outsourced their jobs.

3 Perform a benchmark

"Find out how good or bad the situation really is," says Thomas of Compass. It's absolutely critical, he says, to "put a stake in the ground and understand what you're dealing with."

For The Providian Corp. (Louisville, KY), an insurance and financial services company that weighed the outsourcing pros and cons this past year, that meant not only looking at where it was currently, but where it wants to be five years down the road. "If you don't understand what your future cost structure is going to be, you really don't know how to evaluate whether or not, at least from a cost perspective, you're getting a good deal in outsourcing," says Pete Cola, vice president of Providian Technology Services, the corporation's technology division. Providian eventually decided to keep administration of its mainframe data center and wide area network in-house.

4 Don't hand out extra money

After performing a benchmark, make any improvements in-house that you can. "If you have improvement potential that you can take advantage of yourself, you should do that, and then talk to the outsourcer. If you don't do it that way, you're just giving money away," says Compass's Thomas.

5 Write an appropriate RFP

It may seem elementary, but you have to make sure that the RFP reflects the goals of outsourcing as determined by management. This doesn't mean, however, that management can write the RFP--or even an eventual contract--on its own. "Use a professional to help you write the RFP," advises Thomas. "Some companies try to write the RFP themselves, and they haven't got the foggiest idea of what they're doing." The rise in outsourcing activity has brought about an outsourcing consulting cottage industry, he comments, and there are plenty of firms to help with this process. One step further, he suggests, is to use an outside legal firm that specializes in outsourcing to negotiate the contract.

6 Allow your in-house IS department to respond to the RFP

As long as you have a viable information systems group within the company, give the staffers the opportunity to turn their department around. "Just the fact that you're investigating outsourcing as an alternative is sort of a wake-up call for IS," suggests Compass's Thomas. "This will refocus [the IS department], and put the onus on them to justify their existence."

Providian did just that, besides sending its RFP to five outside firms. Focusing on cost savings for computing for the data center and technical infrastructure, IS drew up a five-year plan, and was able to reduce its internal cost over a five-year time frame by $14 million. "The outsourcers really couldn't get close to that number," says Cola.

7 Realize that outsourcing comes in many shapes and sizes

A common practice among insurers is transitional outsourcing, which frees the IS staff from certain tasks while allowing it to focus on others. This also keeps technical expertise in-house. "This way, for example, you can phase out the old platform with an outsourcer for a period of three to five years while you're building on the new one for the future," suggests Compass's Thomas.

8 Contract term: The shorter the better

Many outsourcers will suggest a term of at least 10 years, and if you're looking to lock in a price, that may be the way to do it. But, in general, experts say a contract of anything longer than three to five years is too long. "The days of the 10-year, rigid contracts are coming to a close," says Kelson of Professional Partners. "It's too hard to predict what's going to happen in 10 years, and it can foster a 'cut corners' attitude on the part of the vendor."

With a shorter contract, you will renegotiate more often, but "you don't know how your business is going to change," says Jackson National Life's Cook. You may later decide [an outsourced function] is very critical," and if you're locked into a long-term contract, it will not be easy to bring it back in-house.

9 Avoid the "married for money" syndrome

"A company that outsources simply because of price," suggests EDS's Miller, "is just like a person getting married for money." Rather than growing to love each other, the relationship tends to end badly. Instead, choose a vendor with whom you can build a strong professional relationship. "I always want to have a very close relationship with the organization I'm outsourcing with," says Cook, of Jackson National Life. "I expect management reporting from them to be held to the same standards as if it was coming from my own staff."

"I firmly don't believe that you should go after an outsourcing deal just to reduce your internal cost structure," says Providian's Cola. You're going to pay for the solution to the problem, whether you outsource or not. Cola advocates establishing a sense of partnership, "to the point where there's trust established between the two management teams."

10 Consider who's in control

Drawing up clear guidelines and including them in the contract can solve the problem of "Who is in control?" Professional Partners' Kelson offers several examples of points to include in a service level agreement: 99-plus percent successful job completion rate; 24-hour response time, or better, from the field help desk; and completion of all projects within five percent of an estimate. All of these can be written into the contract.

EDS's Miller puts it another way. "I usually ask [potential customers], 'Do you have control today? Can you deliver projects on time? Can you hire large numbers of people to do a project, then do something with them afterwards?' Usually they understand that they're gaining control, because they end up with a signed contract that says they're going to get specific results."

CR: Copyright Miller Freeman Inc 1995

AN: 983231

................
................

In order to avoid copyright disputes, this page is only a partial summary.

Google Online Preview   Download