As part of the British insurance company's plan to cut about $500 million in costs, 40%-50% of its IT work will be offshore by yearend
Half of UK insurance company Norwich Union's IT will be done in India by the end of this year, as part of companywide plans to slash £250m off the group's £2bn operating costs.
In an exclusive interview with silicon.com, Norwich Union CIO Alex Robinson said offshoring work to India is crucial both in terms of cutting costs and providing more flexibility of access to IT resources and skills.
He said between 40 per cent and 50 per cent of Norwich Union's IT will be offshore by the end of this year, with specific areas such as application development closer to 70 per cent.
Norwich Union has been using India for IT and business process work since 1998 and outsources most of the work to Tata Consultancy Services (TCS) and Wipro, although the parent Aviva group has its own IT centre in India as well.
Robinson said cost and flexibility are the key competitive advantages Norwich Union gets from offshoring IT work to India.
He said: "There is a labour cost differential, the Indian work is cheaper. The other advantage, and the one that persists almost irrespective of where labour costs go, is the flexibility we get from tapping into the offshore workforce and the offshore suppliers. We can ramp up or ramp down the work that's going on with those companies in a reasonably quick and easy way."
That Indian cost advantage will last for another "eight to 10 years", according to Robinson.
He said: "I can see labour costs rising in India and as that happens that labour cost differential advantage diminishes. In time the differential will diminish to being reasonably insignificant but we think India will continue to be for some time the best place to get the range of skills we need - both legacy skills and emerging skills as well."
Norwich Union currently has an in-house IT department of around 1,900 staff and an outsourced IT workforce of 2,000 - most, but not all of whom, are offshore in India.
Read the full McCue Interview with Norwich Union CIO Alex Robinson here.