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Risk

12/2/2009
08:38 PM
Bob Evans
Bob Evans
Commentary
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Global CIO: Outsourcer HCL To Cut Insurer's Costs By $150 Million

HCL is taking on an end-to-end chain of processes in a deal valued at $200 million that blends IT infrastructure and services with deep business processes and more.

The already hazy line between IT and services outsourcing is continuing to blur as a 250-year-old insurance company with half a million policyholders expects to save up to $150 million by choosing HCL Technologies to manage an end-to-end chain of processes including policy administration, finance, actuarial services, IT operation support, and call-center services.

Underscoring the ubiquitous presence IT has established within large businesses, HCL senior vice president Prasanna Satpathy said yesterday that while the deal includes IT operations, it "also includes much more: business operations, infrastructure, business-process reengineering, claims processing, customer support, and much more."

Indeed, Equitable Life CEO Chris Wiscarson underscored the significance of the deal by calling it "one of the most important decisions in the Society's [250-year] history. . . . I want to help restore polcyholders' savings and this is an important step in that direction," he said in an HCL press release.

While in these challenging times it's certainly true that all companies are looking carefully at costs, that need is particularly acute at Equitable Life because while it does indeed have 500,000 policyholders and manages on their behalf $12 billion in assets, it intentionally stopped taking on new customers nine years ago and has what is known in the insurance industry as a "closed book of business."

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So for Equitable, the imperative was to wring as many costs as possible out of its operations to deliver on CEO Wiscarson's desire to "help restore policyholders' savings." And after narrowing down prospective partners to a final list of eight, the company awarded the job to HCL IBS Ltd., a subsidiary of $5 billion HCL Technologies, which is a rapidly growing and innovative IT services and software firm with clients across the world.

HCL IBS intends to deliver that savings of $150 million to Equitable Life over a number of years—including $12 million in the first year—through a variety of means, said HCL senior VP Satpathy, who also heads up the financial services business for HCL America.

"Cost arbitrage will certainly be a big part, renegotiating the telecom contract is a big part, there will be significant business-process reingeering, and a big advantage for us is that we have the Liberata IT platform that is specifically designed to handle this type of end-to-end deal, including claims and all," said Satpathy in a telephone interview last evening.

That IT platform refers to Liberata Financial Services, which HCL acquired 18 months ago, and Satpathy said the Equitable Life contract "is a true vindication" of that acquisition.

In addition, 500 Equitable Life employees will be transferred to HCL IBS, joining 3,000 other "on-boarded" employees who have joined the company in the course of similar large deals HCL was won in financial services. Along the way, HCL has opened four services-delivery centers in the U.K., and will soon be adding a fifth to handle its expanding volume of business.

Satpathy said the Equitable Life deal underscores the growth in business it has been experiencing recently after a brutal second half of 2008.

"We're seeing some improvements now, there's no doubt about that, but we really bottomed out last year," he said. "So the beauty of the Equitable deal is that it's an indication the companies are really starting to invest again—and it really feels like you're in Heaven."

If HCL IBS can deliver on the proposed savings of $150 million for Equitable Life, that heavenly feeling will surely be spread around.

RECOMMENDED READING:

HCL Ties Its Pay To Boeing 787 Sales

Reader's Digest Outsources Tech Ops To Indian Firm

GlobalCIO Bob Evans is senior VP and director of InformationWeek's Global CIO unit.

To find out more about Bob Evans, please visit his page.

For more Global CIO perspectives, check out Global CIO,
or write to Bob at [email protected].

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