Kanawha, CGI expand IT outsourcing agreement

Lancaster, S.C.-based health and life insurer Kanawha Insurance Co. has expanded its IT outsourcing partnership with Montreal-based CGI to include onsite document management services.

The US$12 million, 10-year business process services outsourcing contract was announced Wednesday, roughly six months after Kanawha inked its initial 10-year deal to outsource its infrastructure management, data centre and application maintenance and development to CGI at the end of November 2003.

Ron Groover, Kanawha’s CIO, said the IT outsourcing deal expanded the resources available to the insurance firm. For example, he said, “If we needed bigger (IBM) AS/400, we would have to purchase it, and that might not be the easiest thing for us to do….By going with CGI, we can leverage their size to our benefit.”

On the application side, Groover said CGI has the “world-class process, systems and procedures that a company of our size would not necessarily have the resources to develop.”

With the document management outsourcing agreement, CGI will provide inbound and outbound mail management; paper to digital conversion; document validation and indexing; procurement; production print of all policies billing forms, reports and explanation of benefits statements; distribution services; and facility support.

Outsourcing document management is a natural extension of the IT outsourcing contract, Groover said, because CGI has a certain amount of expertise in the area as well as in IT. “That’s a good marriage…because so much of document management services requires IT support.”

One of the biggest challenges for insurance companies is the “sheer volume of the incoming and outgoing mail” they receive, said Groover. “You have all this paper coming in — how do you control it?” Using electronic document management services will enable Kanawha to “track and make sure that every piece of mail gets processed or handled in the most efficient way,” Groover said, adding that the best way to handle the documents is to scan them and put them in a workflow system.

As part of the agreement, CGI will take over the front-end scanning piece of the business, and will use Kanawha’s home-grown workflow system to manage the workflow of documents, Groover explained.

Kanawha expects to save 15 to 20 per cent in document management costs per year, and on the IT side, the expected savings “is in the neighbourhood of 35 per cent,” Groover said.

Tom Organ, CGI’s business development director for the Carolinas and Florida, added, “We tell our clients that on a full IT outsourcing contract, using most CGI services, we can save them 25 per cent of their total current IT spend.”

Nineteen Kanawha professionals are joining CGI as part of the deal — something that usually happens with CGI outsourcing contracts, Organ said. “Typically we do offer employment to some, if not most of the IT staff of the client.” In addition, CGI always asks the client to keep a stayback team so the client can retain “some continuation of knowledge and someone responsible for the strategic portions (of IT),” Organ said. Thirty-three Kanawha IT staff have already moved to CGI as part of the November agreement.

Groover added: “A lot of times I think a lot of people are concerned that [outsourcing is] going to mean they have to cut and slash people. The way CGI works, your employees are well taken care of, and they don’t even leave the site if that’s the way you want to do it.”

Organ said that before considering a document management outsourcing arrangement, companies should determine whether document management is part of the strategic core of the company. “If it is, they should keep it, and if not, they should look for whether their current operation is meeting its requirement to support the business objectives. If the answer is ‘no,’ they should definitely consider outsourcing.”

Groover recommended checking references before making outsourcing decisions. Other than that, he said, “I think the most important first step is to be open to [outsourcing]….There are a lot of companies out there that just haven’t considered it.”

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