Standard Life learns from past offshoring mistakes

Insurance group Standard Life is reviving its offshoring strategy in a bid to reduce costs and gain more flexibility in application development so that new products are brought to market faster.

The insurance group had a unsatisfactory experience with its offshore software development partner two years ago. But it has now signed a deal with L &T Infotech and will use a minimum of 20 staff from India with the option to enlist more if required.

The agreement follows a thorough “beauty parade” that had stringent criteria set to ensure efficient project delivery and a smooth relationship, Standard Life’s chief operating officer, Marcia Campbell, told Computing.

“Clearly, price was a very important factor. But the requirements used during the assessment – ­ such as ability to work with our team, quality of the skills available, reliability and responsiveness – ­ were also quite strict,” said Campbell.

“We are having another go at offshoring, but are treading very carefully in this area as we had quite a lot of problems in the past.”

Standard Life has used offshoring for a number of IT projects since 2000, which included successful experiences in areas such as production support. But it lost its appetite for using offshore partners for application development after serious problems beset a previous attempt.

“It was a disaster. The quality of the code was really poor and we ended up having to do all the work again ourselves,” said Campbell.

“What we seemed to be getting was graduates fresh out of university and our project was their first job.”
The firm currently employs 600 developers, including a small team of contractors. In-house staff will not be affected by the decision to offshore.

“Financial services is quite a complicated industry and we are fortunate enough to have a lot of permanent staff who have been with us for a long time and understand the business,” said Campbell.

“We have a very low turnover ­ – just under two per cent in IT – ­ but we also wanted to be able to flex that resource,” she added.

Lessons learned from the previous experience with offshore software development resulted in a sharper focus on skills assessments and monitoring to ensure best value for money.

“Finding the right partner that suits the way we work demanded quite a lot of work upfront, to check the depth and breadth of their experience,” said Campbell.

“Having people from your end looking after the relationship is also very important. Our head of development is very hands-on – ­ he sponsored the project and wants it to work.”

Campbell said the new offshoring arrangements will be subject to a very tight management regime.

“We are saying to them [L&T Infotech], this our infrastructure, this is the way we do things and here is the specification. As the relationship develops, you can loosen these things but because we had a bad experience in the past we are starting off with quite a bit of control,” she said.

Ongoing projects at the insurer include the development of a platform supporting an upcoming self-investment product. The system, which is being built using agile programming techniques, will eventually enable workers to
manage and modify their own pension portfolios.

Under its new offshore agreement, the insurer’s partner will also be required to use agile methodology in ongoing and new projects (see below). Fees will be paid on delivery of key milestones within individual projects.

“The agile development approach is helping us get more value more quickly when we are launching new products,” said Campbell.

“In our business, the ability to get a new product to the market quicker than your competitors is crucial and we are using agile and IT to ensure that new ideas are implemented in the most efficient way possible. That, in turn, means we can start generating income and adding value to the business much more quickly.”

Agile methods allow rapid exploitation of IT synergies

Standard Life is a keen proponent of the use of agile development methodologies to help develop new products quickly and to streamline its existing set-up.

Some platforms used by the insurance group in Canada and Germany are different to those used in the UK, and the firm is now investigating commercial and strategic implications of this disparity and is identifying opportunities to rationalise and integrate systems, said Campbell.

“A key work stream is to confirm IT processes and solutions in place today around the group to help us identify duplication, gaps and create a plan for achieving synergies,” she said.

“But there’s no point bringing in new IT processes if they don’t add value to our business, which is why we have adopted an agile approach to IT development where possible.”

Although much of the change being introduced at the firm revolves around IT, the agile approach has been extended across other divisions and best practice has been introduced to reduce costs and support business growth, said Campbell.

Office layouts at Standard Life have also been changed to stimulate interaction between project teams.

Like this story? Spread the news by clicking below:

 del.icio.us     Digg this     reddit!