Insurance Data Projects: A Cost/Benefits Analysis of Long-term External Dependency

In today’s competitive business environment, data-driven decision-making is no longer a luxury but a necessity. Whether it’s building machine learning (ML) models, developing artificial intelligence (AI) frameworks, or undertaking broader data projects, many organisations face the challenge of deciding how to build and deliver these solutions. A cost/benefits analysis is essential to ensure that a business is making the right investment while keeping an eye on long-term scalability and independence from external dependencies.

Understanding Opportunity Costs

When embarking on data, AI, or ML projects, opportunity cost must be a major consideration. The question isn’t just about what resources are required now, but also about what’s lost by not making strategic investments in internal capability.

1. Short-term Cost Management vs Long-term Competency
2. Intellectual Property (IP) Retention
3. Scaling with Flexibility
4. Long-term Value and Cultural Integration

Comparing Cost Structures: Internal vs External Talent

The financial cost of external providers is often deceptive, especially when looking at the long-term implications:

• Contractors: Typically charge by the day or hour, which can make short-term engagements seem cost-effective. However, for long-term projects, these costs accumulate quickly, especially if the contract is extended beyond the initial scope. The inclusion of IR35 compliance can add additional administrative burdens and costs for companies operating in the UK.
• Big Consultancies: While offering large teams and resources, these come with significantly higher fees. Their cost structure tends to reflect their brand reputation and operational overheads, which doesn’t always translate into better results. Additionally, companies may find themselves assigned less-experienced staff, particularly if they’re not involved in selecting the team(HTD Cost Benefits Analy…).
• Evolution HTD Talent Solutions: Offers a hybrid model that provides flexibility in both cost and contract length. Clients can hire talent on a temporary basis with the option to transition them to permanent roles after two years. This approach allows companies to trial talent without committing to long-term contracts or risking high turnover costs(HTD Cost Benefits Analy…).

Achieving Independence from External Service Providers

The ultimate goal for businesses investing in data-driven projects should be to build internal capabilities that reduce, if not eliminate, dependency on external providers. This independence brings with it several strategic advantages:

1. Customised Solutions: Internal teams have a deeper understanding of the business, allowing them to create more tailored, innovative solutions. This is in contrast to external teams, which may apply generic, off-the-shelf approaches that may not align perfectly with the company's unique challenges.
2. Ongoing Project Efficiency: By building in-house expertise, businesses no longer need to restart the hiring or contracting process for each new project. Instead, the same team that delivered one project can adapt and iterate on new challenges with greater speed and efficiency.
3. Retaining Core Competencies: With a flexible talent solution, such as the model offered by Evolution HTD, you can start with junior engineers and gradually build up more specialised internal resources. This ensures your organisation retains core competencies while scaling your data capabilities over time(HTD Cost Benefits Analy…).

Flexibility in Talent Solutions and Scaling

Flexibility is vital for modern businesses. The ability to scale up quickly during intense project phases and scale down during off-peak periods can significantly impact cost management. Evolution HTD offers a unique approach to scaling, which focuses on the long-term integration of talent into the company. Their pre-vetted data professionals are trained to work within your specific business context, such as the insurance sector, ensuring that they not only deliver technical results but do so in a manner aligned with your broader business goals.

Additionally, the ability to retain talent permanently after a trial period ensures that businesses don’t lose valuable IP and institutional knowledge once a project is completed. This stands in stark contrast to the more rigid contract structures offered by big consultancies, where talent is often rotated out or reassigned to other clients, leaving your business with little to no long-term benefit(HTD Cost Benefits Analy…).

The Budget Dilemma: Short-term Spending vs Long-term Investment

Budgets are always a concern, especially during uncertain economic times. However, the cost-saving benefits of opting for external contractors or consultancies must be weighed against the long-term investment required to build internal capabilities.

External providers might seem attractive in the short term due to their ability to deliver fast results without the overhead of recruitment or training. But in the long term, these costs stack up due to high daily rates, project extensions, and re-hiring needs.

In contrast, by building an internal team with scalable solutions like Evolution HTD, companies position themselves to reap the benefits of reduced external dependency, long-term cost-efficiency, and retained knowledge. Furthermore, internal teams can adapt more easily to new challenges, avoiding the expense of re-engaging external teams whenever new projects arise.

Avoiding Over-reliance on External Providers

As we progress into an era of increased reliance on data, AI, and ML, it is clear that the biggest risk facing insurance leaders and other industries is an over-reliance on external providers. By investing in a scalable, flexible talent solution like Evolution HTD, businesses can build internal capabilities that not only meet their current needs but position them for future success.

In the end, the question is not whether businesses can afford to build internal capabilities—it’s whether they can afford not to. The long-term opportunity cost of continuing to depend on external solutions will far outweigh the initial investment in in-house talent. By making this strategic shift, businesses can achieve greater efficiency, reduced costs, and long-term control over their data-driven future.