Blue Shield of California Pulls IT Services Back In-house


    EDS is sure to take a beating over its greatly diminishing role at Blue Shield of California, if recent maneuvers at the San Francisco-based health insurer provide clues.

    Recently promoted CIO Elinor MacKinnon told the San Francisco Business Times her company is just beginning preparatory work on “cleaning up” its current IT systems, which have been managed by EDS, and “exploring the impact on business processes.” Through a spokesman, she declined interview requests with

    MacKinnon was promoted into her role as senior VP and chief information officer in Nov. 2005. She joined Blue Shield in 2004, as a VP of applications services.

    The company has of late been advertising to hire a “Director of Repatriation Planning,” who will be “responsible for establishing the multi-year strategy, detailed planning, and implementation of a roadmap for changing the relationship with EDS as it relates to the oversight and on-going project development and enhancement of the EDS legacy systems.”

    According to the job description, “The individual is accountable for the modification of the standing processes to change the way Blue Shield engages EDS from a business project perspective, throughout the project life cycle, and to establish clear roles and responsibilities for the changes to the systems. In that regard, the individual is required to plan for, and implement, a change to the IT staffing strategy that will enable a mix of Blue Shield and selected vendors, to take on more of the development work from EDS, accomplishing this with minimal/or no risk to existing SLAs.”

    The ad suggests that the repatriation of EDS systems will take 18 months.

    The Business Times coverage quotes MacKinnon as saying the legacy systems “last had a major upgrade ‘at least 10 years ago.’” A spokeswoman told reporter Chris Rauber that the organization “plans to spend ‘tens of millions of dollars’ over the next three to five years on the massive project.”

    Blue Shield was an early client for EDS, which first entered the healthcare services field in the 1960s. In the mid-‘90s EDS signed a 10-year agreement with Blue Shield to create and run new HMO systems.

    At that time, the non-profit was in massive turmoil as part of a “change everything at once” reengineering process sparked by then-CEO Wayne Moon. The effort focused on consolidating 11 service centers located around the state into three regional centers. The workforce shrunk by 1,000 people — a quarter of the entire staff — within two years. The IT systems introduced at that time became a major driver in helping turn the company’s fortunes around.

    But information technology always dates itself quickly.

    According to former Blue Shield executives, the company “invested more than $50 million five years ago in a failed attempt to improve the system,” which handles claims and enrollment.