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Increases its capacity 35 percent faster than its costs
Aflac Japan—a branch of US-based Aflac—is the No. 1 life insurance company in Japan in terms of individual policies in force. Providing cancer, life, medical and other life insurance products, Aflac Japan insures one in four Japanese households. The branch generates more than 70 percent of Aflac’s global revenues, which totaled US$15.3 billion in 2007.
It chose Accenture when it decided to outsource its IT application maintenance and support.
To retain its market position and high levels of profitability, Aflac Japan continually looks for ways to improve its operational efficiency and productivity. One area of the business that was ripe with opportunity was information technology.
Aflac Japan believed that by leveraging a trusted third-party provider’s Application Management Services (AMS) for its IT application maintenance and support functions, it could more flexibly adjust work volumes according to business needs. Also, by replacing its current IT development subcontractors with highly skilled, lower-cost offshore resources, Aflac could reduce costs.
Finally, the company believed that transitioning to the AMS model would improve the quality of application maintenance by introducing standardized processes benchmarked against industry standards.
The company’s decision to leverage AMS for the maintenance of its IT applications is supported by findings from Accenture’s High Performance Business research. This research has confirmed that high-performance businesses deliver significant results by concentrating on core processes and outsourcing noncore processes to others.
Aflac Japan selected Accenture as one of its AMS providers because of its proven offshore delivery approach and its skilled and flexible global workforce. Also important was that Accenture had successfully implemented a number of pragmatic solutions that had, over the years, helped Aflac Japan transform its IT department, its sales strategies and its core business processes. Through these strategic initiatives, Accenture had clearly demonstrated to Aflac Japan its commitment to helping the insurer achieve high performance.
Under terms of the seven-year agreement, an offshore services team from the Accenture Delivery Center in Dalian, China, provides small- to medium-size application development, enhancement, maintenance, incident resolution and off-hours support services. An onshore Accenture team provides demand management services and coordinates the project delivery with the offshore team members.
In addition to using the Accenture Global Delivery Network for low-cost, high-quality resources, the project team used the Accenture Delivery Methodology to quickly and effectively transition application development, maintenance and support activities from the Aflac team and other contractors. With this methodology, Accenture was able to successfully complete the transition of service ahead of schedule.
With Accenture’s help, Aflac Japan is reducing its operational costs, which allows the company to competitively price its products and retain a high level of profitability. The arrangement is on track to deliver nearly $30 million in savings over the next seven years.
Aflac Japan is applying these savings to other areas of the organization, thereby increasing shareholder value. In the year the arrangement went into effect, Aflac’s share price increased by 33 percent to its highest level in history. The application outsourcing project has contributed to this outstanding shareholder value creation.
In addition to financial benefits, the outsourcing program allows Aflac Japan to maintain the high quality of its applications and improves the consistency of its application development and support services.
According to John Moorefield, chief information officer, Aflac Japan,
"Implementing outsourcing strategy allows us to increase capacity at a rate 35 percent faster than our costs."
Finally, this strategy is allowing Aflac Japan to free up its own IT resources to participate in more strategic activities for the company, bring products to market faster than its competitors and manage team performance through service level agreements and new reporting tools. In all these ways, Aflac Japan is using application outsourcing to position itself for high performance and long-term competitive advantage.
For more information about achieving high performance in insurance, contact Accenture via e-mail.
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