Business/IT 'Linkage' Key to Insurer's Adaptation to Changing Marketplace

The architecture of the future sites on a foundation of business and IT linkage, according to Deborah Smallwood, Founder, SMA.

Conducting business as usual won't cut it anymore. As insurers emerge from the economic crisis, they cannot resume old technology investment practices and expect new results. Even though North American insurers spent more than $200 billion on technology in the past five years, many are still saddled with complex legacy environments and extensive data problems that continue to handcuff the organizations with high costs and lack of agility. Overall the industry is far from achieving agile and cost-optimized operations and technology environments.

Misalignment of technology spending and added value isn't the only problem; the world is rapidly changing. Witness the shift in demographics as 72 million baby boomers begin to retire and the 60 million Gen-Yers entering the workforce buy insurance products. Customers' and producers' expectations are changing because of the way technology is woven into the fabric of everyday life, which translates to the fabric of insurance. Now that people can be connected 24x7, they expect service in real time, anytime and anywhere with consistency of service, price and quality -- no matter which communications channel they use. Insurers that want to grow and thrive have to embrace the new ways of the world.

In 2010 budgets still will be tight as the economy and insurance industry recover. But rather than looking down into the budget, insurers will do well to look up and out at the possibilities presented by the changes. Insurers need to think differently about technology and ways they can link it to business strategies and plans. Setting the right technology architecture and leveraging best practices of service-oriented architecture (SOA) are essential. The primary way to link business and IT is through leveraging the architecture as the foundation. Those investments need to balance the long-term and short-term business needs yet still be part of the business and IT transformation. The basic steps to achieving this include:

1. Find the link between business and technology Determine how important technology is to your strategy; if it's vital, embrace it. You cannot consider IT investments simply the cost of doing business. You want to make the right investments in the right projects at the right time to return the most value.


2. Create an enterprise road map. You'll gain a true competitive advantage when you chart your business and IT course for the next three to five years. Integrate initiatives that drive and support capabilities to promote growth and optimization that are unique and critical to your business. Align your strategy with technology to achieve your goals. Understand how your technology investments help you achieve the desired outcomes.


3. Build an SOA framework. Now is the time to think of the business and technology as reusable services, from business operations and applications to data and infrastructure. An overall business and technology architecture is not optional but foundational. Although the hype over SOA has ended, momentum and successes across the industry show that using it is a common-sense way to create value with technology investments. Any technology investment must enable a mind-set of reusability that supports agility and cost optimization.


4. Balance accountability and empowerment. Clarity about ownership, roles and responsibilities in an overall governance model is essential. Ownership by the project team is critical. Once you make a decision on a technology investment, empowering the project team proves to be the catalyst for success every time. Insurers can no longer afford to miss the mark from either a financial or time-to-market perspective.

The time is now to create true linkage between business and IT, make wise technology investments, and drive accountability to the project teams. Linking the overall business and technology architecture depends on a foundation of business and IT linkage. There is no room for missteps.

Deb Smallwood ([email protected]) is the founder of SMA: Strategy Meets Action. SMA is a strategic advisory firm focused on helping insurers create business and IT linkage, develop business & IT road maps, implement governance models, and make the right technology investments.