The mandate to achieve ROI is making IT/business alignment a reality, according to two Cambridge, MA-based executives from IBM Global Services: Julie Donohue, National Practice Executive, Insurance; and John Connolly, General Manager, Strategy and Change. They offer insights into how insurers can get more value out of their technology investments.
Insurance & Technology: How can insurers get better results in achieving ROI?
Julie Donohue: There's a lot of focus on issues like, "How do I take the costs out of IT, and out of the business?" This isn't as critical as focusing on how to make sure every dollar you spend in IT has the right kind of multiplying effect on the business.
We are trying to get insurance clients to focus on taking the costs out of core operations and administration processes. They have built up tremendous costs structures over the past 10 years, in areas such as service and call centerswhere they built centers and capabilities without being clear on the returns. They need to focus on what's not core to the business, and where to look for alternatives such as business process outsourcing. Insurers need to shift their technology investments to the front end of the value chain, areas such as product development or interaction with distribution channels. In other words, take the costs out of core operations, and shift investment to something that has measurable value.
John Connolly: Companies used to look at what they spent on IT, and how that helped them achieve efficiencies. Today, they also want to know how to drive efficiency and productivity through IT investments, how to accelerate top-line growth, and how to reconfigure their business design via the e-business technologies out there.
Donohue: Another issue is vendor management. A lot of companies work with too many vendors and suppliers. It gives the illusion of price flexibility, but actually creates a lot of overhead.
I&T: What does this mean for IT management? Are CIOs under more pressure?
Connolly: Seventy-seven percent of IT buying issues are controlled across the domain of officers, not just the CIO. As e-business has unlocked the power of the enterprise, it's also unlocked the buying power of the enterprise in terms of who owns technology.
What has happened in terms of decision-making is that people are looking at the business value they can get from their IT investments. This is very good for the enterprise; it involves everyone at the table, in terms of what the key issue are. IT is no longer an isolated department. The CIOs of the world are really embracing this type of direction, because IT is trying to show more business value. They have to master complex integration issues, and have to do it more than ever before. Unless the business side is involved in decision-making, it's not going to be impactful.
I&T: IT/business alignment isn't a new concept. What's different now?
Connolly: There's more alignment now around the key strategic issues of the business that involve business and technology. Business executives are becoming more accountable for IT results, and IT executives are more accountable for business results. In the past, where there was poor strategic translation, it became more expensive at the execution level. Now we're getting better execution.
I&T: What should insurers know consider when trying to measure technology ROI?
Connolly: In terms of metrics, there are four areas. First, what's the level of cooperation between IT and the business side, in terms of development of the business strategy? Second, what are the business-owned outcomes?
The third area is how to get both sides to optimize the enterprise architecture. The fourth consideration is how to set up business-driven IT measures, so IT people are looking at business measures, not just IT measures.
Katherine Burger is Editorial Director of Bank Systems & Technology and Insurance & Technology, members of UBM TechWeb's InformationWeek Financial Services. She assumed leadership of Bank Systems & Technology in 2003 and of Insurance & Technology in 1991. In addition to ... View Full Bio