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Refining Business Alignment at AIG

Linking IT investment tightly to business value is nothing new to AIG (New York, more than $600 billion in assets under management), but the P&C powerhouse has worked on refining its governance model during Mark Popolano's tenure as CIO, beginning in 2000

Linking IT investment tightly to business value is nothing new to AIG (New York, more than $600 billion in assets under management), but the P&C powerhouse has worked on refining its governance model during Mark Popolano's tenure as CIO, beginning in 2000. The challenge he faces is to maximize value across the enterprise while allowing for solutions that match individual divisions' needs. "We've applied a number of strategies to match the complexity of AIG. We're many companies, and no single approach fits all," he remarks.

Popolano enforces an "IT monarchy" when it comes to enterprise infrastructure, but his organization's approach to the application side operates on what he calls a "federal and state relationship." "We set standards that apply against the entire company while allowing flexibility within the divisions to meet their business needs," he says.

In determining technology investment, AIG uses its Information Technology Financial Management (ITFM) governance model. The carrier convenes several review boards, comprising line-of-business executives, CIOs and technical architects, to consider technology strategy on 12-, 18- and 24-month timetables. The original focus of the ITFM model-instituted in 1999-was simply to get a handle on cost, according to Popolano. "The first generation was a matter of getting to 'I know what my projects are, I know my spend, I know my tasks,' " he recalls. A second iteration of the ITFM focused on placing initiatives in rough categories, such as "development enhancement" and "lights-on."

"We're now getting more and more granular to see how and to what extent an initiative aligns to the business," Popolano says. "We ask, 'Is there a competitive advantage to the business? Is this an impediment to the business?'" Additional profiling determines projects' internal or external orientation and their impact in terms of revenue and expense. Grouping prospective initiatives into various graded "portfolio buckets" enables tighter alignment with business objectives, says Popolano. "We're able to sit with the business and say, 'These are the projects that are highly aligned and highly competitive, so that's where the focus should be.' And because these things are categorized now, we can look at synergies across the divisions."

AIG is currently implementing a methodology to track projects' success, using a variety of indicators matched to the diversity of the company. "We apply about 36 different indicators to the different business areas, as well as the different technologies or architectures we use against those areas," says Popolano. "We've been working on those indicators for the last 13 months, laying out the map, and now we're doing a series of tests so that we can involve them in the 2004 and ongoing planning sessions."

Anthony O'Donnell has covered technology in the insurance industry since 2000, when he joined the editorial staff of Insurance & Technology. As an editor and reporter for I&T and the InformationWeek Financial Services of TechWeb he has written on all areas of information ... View Full Bio

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