There's money to be saved in outsourcing. But you can save even more money by properly managing the outsourcing...
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deal according to Allstate Corp.'s procurement specialist.
After he spent so much time wading through staffing proposals, Greg Hopkins elected to let software manage the intricacies of augmenting the Northbrook, Ill.-based insurance giant's IT staff.
"We were getting 20 to 30 calls a day from people who wanted to be on our preferred supplier list," Hopkins said. "It dawned on me there may be some value there."
Enter Fieldglass Inc., a Chicago-based provider of procurement solutions. Allstate piloted a program with the company's InSite software late last year and recently signed up for a three-year agreement. It's a move Hopkins expects will save the company "in the seven figures" over the next five years.
It was a long progression up to this point for Allstate. In 1997, the company had a decentralized procurement system with multiple contracts for a single supplier throughout the organization. Allstate centralized the program and decided on 12 IT suppliers who accepted a contracted hourly rate for various skill positions. By 1999, that list had been pared down to 10 primary suppliers and 15 secondary suppliers.
But as IT grew more complex and there was a need for more skill sets, those suppliers could no longer handle the demand. By 2000, Allstate's list of suppliers had grown to 180 when Hopkins decided maybe he could save the company some money. Allstate began by hiring a company to manage its second- and third-tier IT suppliers.
"There was still extensive manual work," Hopkins said. "The next logical step was to see what was available in the world of technology." Three vendors who were "more closely married to the process Allstate already had," were considered, Hopkins said.
Allstate elected to begin with a pilot program from Fieldglass that posted resources requests and gathered rÉsumÉs. The second part of the pilot was a time-keeping function for supplier employees. Previously, suppliers kept paper time cards that went through an internal Allstate system. That led to problems with typos and synchronization. "Suppliers would call up and ask 'why didn't we get paid for Bob's work last month?'" Hopkins said. Those types of calls have been drastically reduced if not eliminated, he said.
It's been difficult to calculate ROI, because it is the suppliers who are essentially paying for the tool based on a percentage of what they receive from Allstate, Hopkins said. Suppliers are footing the bill, but they do receive more reporting capabilities and a mechanized way of providing resources.
"None of them are happy about it, but in the long run it's intended to be better for everyone," Hopkins said.
To date, Hopkins said he hasn't received any negative feedback.
Additionally, Allstate has tweaked the application to consider the company's IT division in Northern Ireland as a vendor. Resource requests are sent there first and forwarded to the other teams automatically if the division can't handle it.
For anyone thinking of using software to help manage their outsourcing, Hopkins recommends being up front with suppliers. Without showing them the benefits of a system, it "can come as quite a shock," Hopkins said. He also suggests selecting a vendor-neutral application. When working with a supplier, they may have a tool of their own and not like being told they have to use yours, Hopkins said.
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