November 15, 1999

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Solution Series:
Financial-Services Firm Looks For Competitive Advantage

merican International Group Inc. is outsourcing application development as it migrates its underwriting system to thin-client and Web systems from client-server models.

The $37 billion insurance and financial-services company also relies on consultants to suggest strategies to handle competition on the Internet. "We have a hard time finding people with Internet-technology skills; they are a new breed--hired guns--who can't be pinned down to a corporate office," says Robert Guido, senior VP and CIO of the E-business division.

InformationWeek: What strategy functions are you farming out?

Guido: We want to know how customers want to interact with an insurance company. We rely on consultants to find out the Internet strategies of our competitors, which include traditional financial-services companies and online insurance startups, such as InsureWeb and InsureMarket. We want to know whether these startups that offer access to multiple financial services will eat away at our business, how we should position ourselves in the marketplace, and what kind of technologies we need to start worrying about.

InformationWeek: How are these new needs changing existing outsourcing deals you have in place?

Guido: We're looking at a new breed of outsourcing companies to do the Internet-based strategies and development. Although traditional client-server shops like IBM and EDS are evolving to handle E-business requirements, building a user-friendly browser-based application requires a different expertise. Companies that have been developing Internet applications for five years are the ones we have chosen.

InformationWeek: How much do you outsource, and what other criteria do you consider in choosing the outsourcing provider for E-business activities?

Guido: For the most part, we supplement our internal IT staff. We like to oversee and direct outside application development. For instance, we're installing a new E-commerce technology platform from Vignette Corp. Initially, we are totally outsourcing that to Icon CMT, a group within Qwest Communications, because they have expertise in that product and can integrate that platform with our back-end systems. Because it's a very sophisticated and complex technology, we went to US Interactive, a company that is an expert in designing good front ends, for our Web-site design.

InformationWeek: How much of the development and strategy work have you kept in-house?

Guido: We keep much of the legacy integration in-house because it involves confidential customer databases. We also keep much of the top-level decisions about business processes, project management, and IT architecture.

InformationWeek: What should customers check out before outsourcing key E-business development?

Guido: Select a company that has sound process and methodology in addition to good financial resources. Ask to talk to customers that have done similar projects. Negotiate a fixed-price contract, and break the project into pieces so that you get some immediate deliverables to ensure the quality of the code. Make sure your company owns the applications code; otherwise, it can be resold. Finally, make sure that as much of the development as possible is done on your company's premises so that the project can be closely supervised.

InformationWeek: Can a single outsourcing provider meet all your needs?

Guido: No. To be a true global financial-services company and provide reliable, round-the-clock access to our site, we need redundant Internet hosting providers; caching services that will eliminate bottlenecks; and outsourcing service providers that will constantly watch our Web performance, besides those that do applications development.

InformationWeek: Is outsourcing costing more?

Guido: Actually, we are able to do competitive bidding and get a better deal because many outsourcing companies are jumping on the Internet bandwagon. This is a good trend because development of a policy-issuing transactional system like ours can cost upward of $2 million to build.

Photo by Catrina Genovese

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Go on to the next Q&A, "Outsourcing Lets Honeywell Stay On Course."

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