IT outsourcing not a cost saving

An insurance firm has reduced costs by bringing IT back in-house

LAS VEGAS: Insurance firm Liverpool Victoria (LV) gave a useful insight into overhauling IT outsourcing deals to reduce costs at this year's CA World event in Las Vegas.

Steve Lewis, head of IT governance at LV, detailed a huge transformation the firm has been working on since 2007, including growing its IT department from just two people to 300, and bringing many of its outsourced services back in house.

The overhaul came about after a new management team was brought in under new chief executive Mike Rogers in 2007. At that point, the firm had 2,000 employees, two of which made up the entire IT staff. Speaking to V3.co.uk at the show, Lewis, who joined as part of the transformation, said there had been a period of under investment in IT.

"Normally you'd retain a governance team to manage the IT outsourcers," Lewis noted in reference to the minimal in-house IT resource. "It's probably not the best way of running IT."

Under Rogers and the new management team, the company has grown to 4,000 employees, partly through acquisitions, with an IT team of 300.

"We needed better IT to turn around the unprofitable areas of the business," Lewis said.

The major change of the transformation process has been to the outsourcing provisions. A 10-year deal with EDS was terminated early, in April 2008, seven years into the contract. LV is now using a raft of products from CA to manage its IT infrastructure in-house, including Role & Compliance Manager, CMDB and Clarity PPM SaaS.

Lewis said that bringing IT back in-house has given the firm a more consistent delivery of service operations, and better control over the technology.

Although the key benefit of outsourcing is generally seen as cheaper running costs, Lewis said that rethinking LV's outsourcing strategy has resulted in a cost reduction, mainly due to renegotiating deals and getting rid of products with high support costs.

LV now has a mixed model of IT, with some outsourced products and some in-house, although Lewis could not specify which products fall into which camp.

While LV is still focused heavily on the transformation process and governance issues, Lewis said the firm has started looking at virtualisation technologies, but has no dealings in cloud computing yet.

On a side note, Lewis revealed that, while the organisation is a Windows shop, it has no plans to upgrade to Windows 7 yet.