Canada Life‘s CIO has taken a unique approach to outsourcing by striking any references to technology from his contract with IBM Canada.
The five-year deal, announced
Monday, will see Big Blue manage the insurance company’s software from the twin campuses of its insurance solutions centre in Toronto and Waterloo, Ont. Doron Cohen, senior vice-president and CIO for Canada Life, said he isn’t as concerned with the particulars of the contract as he is with the results.
Traditional outsourcing “”always has an indigenous win/lose part to it, because the vendor has to sell you more technology so they can make more money,”” he said. “”It doesn’t matter what kind of nice wording you put to it, it’s always the case.””
According to Cohen, it’s the technology minutiae that can get in the way of a prosperous relationship. “”I don’t want to be in any position where I have to manage CPU efficiency or database efficiency, I want the outcome not the input,”” he said. “”I struck it out (of the contract) and replaced it with so many upgrades per year, because an upgrade is an outcome.””
The contract with IBM and insurance software specialist Genelco, owned by the Royal Bank of Canada, is the first insurance example of IBM’s business on-demand model in North America. The participants get paid per policy sold by Canada Life and managed by IBM. That amount was not disclosed.
Cohen said he’s not concerned with how the work is divided between his outsourcing partners. “”To be honest with you, I don’t really know and I don’t really care. I contracted for a certain outcome. I contracted for so many policies being maintained on their systems at a level of support and a level of continuous upgrade.””
As long as their work helps the company sell policies, he explained, everyone is happy and everyone gets paid. But this isn’t a revenue-sharing agreement, he said. IBM has a financial cushion if Canada Life doesn’t sell as many policies as expected, and if the insurance company exceeds expectations, IBM will provide group discounts.
“”It takes the business risk out of the contract,”” said Cohen, and is one of the reasons Canada Life became an attractive acquisition target for Great-West Life, which offered $7.3 billion for the company last month.
IBM Canada has grown its insurance practice considerably in recent months through outsourcing deals with Manulife and Sun Life. But those were for infrastructure management, said Paul Sammut, business development executive for IBM’s insurance solutions centre. “”The (facility) is really centred around business applications and business value, so it’s a little bit different from those services,”” he said.
“”It’s a centre where we take custodianship for an a