The Challenge for a CIO in Africa (or Middle East)
Visiting South Africa recently, I was struck by the insurers' frustration of the lack of vendor commitment to the country. My conversations were with large insurers – and I mean seriously large companies tipping billions in premium -- and it appears even these companies are unable to attract vendors to make the serious investment. Those vendors that have, appear to have local operations that are not able to deliver to the standards of their international parents.
This is a story that is repeated across Africa, and the Middle East. These are small but growing markets but in terms of potential, merely amount to rounding errors in global premium when compared to markets such as India or China. It’s understandable that suppliers choose to chase the big markets (but not why local operations offer poor service). So where does this leave the CIO of an insurer in Africa or the Middle East?
I’ll stick my neck out here and propose something for consideration – offshoring. Labour arbitrage and cost savings are typically the headline benefit of an outsourcing deal and admittedly, there is little labour cost saving to be had between Africa and India. But there is a lesser talked about benefit – one of a vast pool of skills.
Celent has been researching outsourcing recently and I am impressed at the level of commitment from providers to the insurance domain. You know the figures of the number of IT graduates in India and China each year and that many of them are choosing the outsourcing world. The large outsourcers offer tremendous career opportunities and a certain cache on the resume.
I’d challenge insurers in poorly served countries to think laterally to solve this problem. Outsourcers have offered staff augmentation for many years. Now add to that a deep understanding of insurance and of the vendor solutions on the market, and a maturity of the delivery model and the proposition looks all the more appealing. Outsourcers in India and China also understand about poor communications infrastructure and will be in a position to offer innovative solutions.
I’d challenge outsourcers to look at Africa and the Middle East as interesting expansion opportunities. South Africa has always been interested in looking outside of the country for innovation, best practice and skills and I imagine other parts of Africa and Middle East are similar. Revenue from these regions will not offset the 2009 slowdown in contracts in Europe and North America. However, a revenue stream from these regions is likely will to be a little immune to the global insurance cycle and provide a small buffer in future down cycles.
This has been really interesting piece of information for vendors who intend expanding into markets other than recession hit (so far only target markets) markets of US and Europe. With little interest and pieces of information gathred by me so far, I was of the opinion that there is scope and your comment has validated my understanding. But I am still struggling with drawing any tangible comparisons. It would be appreaciative of you, if you can also write about how these markets are diffrent from US/Europe and how diffrently IT vendors should approach these markets?
I'll think this over and post some more on the topic in the future.
Thanks for the feedback.
Catherine, it is very encouraging to hear that African and Middle Eastern insurers are interested in vendors (I hope you are speaking of insurance technology vendors: software, data, services, outsourcing). They could help themselves by supporting global or at least pan-African standards with regard to policy terms and all related issues. Vendors want to make investments where they can achieve the maximum leverage. If each country and company within a country wants to be unique even in ways that don't contribute value, then it requires much more investment by vendors. Let Africa learn from the 50 United States - don't have a different set of regulations for every possible domain. It reduces operating efficiency and consumes energies that could otherwise be applied to innovation. Mike Gantt, http://mikegantt.wordpress.com (Mike Gantt’s Insurance Technology Blog)