Multinational insurers’ IT costs are climbing as they restructure their digital resources and services to comply with a slew of local laws and regulations.

Rising barriers to international trade and business are forcing global insurers and other multinationals to pay more for their digital services. They’re having to restructure and often replicate their digital resources and services to comply with a proliferation of local laws and regulations. This digital fragmentation is already costly and is likely to become a bigger burden in future.

More than two-thirds of the CIOs and CTOs we surveyed confirm that rising barriers to globalization are pushing up their IT costs. Ninety percent of them expect international restrictions to fuel cost increases in the next three years. One of the big contributors to climbing costs is the need to source local IT talent. Many countries have tightened recruitment laws to boost local employment. Other factors include the need to multiply data centers, comply with different national IT standards and source equipment and services locally. Reduced competition among domestic product and service suppliers is also likely to push up IT costs. Furthermore, the systems integration required to manage these diverse digital resources and services will be expensive.

CIOs and CTOs at multinationals are facing a deluge of bureaucracy.

Digital fragmentation is not only hiking costs. It’s adding to the complexity and risk of global IT operations. CIOs and CTOs at multinationals are facing a deluge of bureaucracy. Not only must they comply with many different national data and employment laws. They must also ensure that their local partners, suppliers and customers observe these regulations.

Further additional overheads are likely to include:

Greater security to protect sensitive personal data. The growing number of data localization laws, which require companies to keep personal data within national borders, will force companies to look for new approaches to security. Techniques such as “sharding”, where data is split and stored on computers at several locations, will no longer be permissible.

Stripping and filtering data to safeguard data privacy. To ensure that people’s privacy is not breached, many companies will have to separate personal information from business records that track, for example, sales, deliveries and service calls.

Checking data compliance. Data that corporations transfer within their organizations will need to meet compliance regulations if it travels across international borders. Similarly, data sent between business partners must also be checked to ensure compliance with local laws.

In my next blog post, I’ll discuss how digital fragmentation could stymie insurers’ plans for growth and innovation. Until then, follow this link for more information about the challenge of digital fragmentation.

Digital Fragmentation: Adapt to succeed in a fragmented world.

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