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Allmerica’s IT Gets the Business

Realignment of leadership, refocusing of sourcing priorities, and process improvement measures turn a passive IT organization into a source of competitive advantage.

Greg Tranter could be forgiven for envying the position of two fictional consultants in a recent television commercial. In the ad, the consultants sit before a CEO, enumerating process improvement recommendations. At the end of their presentation, the CEO says "Great! Do it!"-to which the consultants reply: "Oh, we don't actually do things." Unlike those characters, after consulting on Allmerica's IT needs from the business side, Tranter didn't have the option of refusing his CEO's call to action.

In company with other business executives at Allmerica Financial (Worcester, Mass. $3.3 billion 2002 revenue), Greg Tranter had expressed concerns about the way the IT organization had been performing. While not short on talent, the technology department was seen by the business as failing to deliver reliable solutions on-time and to spec, according to Tranter. It was an organization suffering from "a lack of focus on process and on what IT was doing to benefit the business." Tranter's criticisms led to his being appointed-along with colleagues Lorna Stearns, a business improvement consultant, and Angela Smith, a finance manager-by then-CEO Jack O'Brien, to evaluate the IT organization and come up with a model for transformation. In March 2000, when the team had come up with their model, Tranter, then COO for Allmerica's P&C operations, thought the job was done. Within a month, he was de facto CIO (Tranter was formally named to the post in July).

Since that time, Tranter has led Allmerica Technology Services (ATS) from being, in his words, a passive, reactive organization, to a proactively oriented consulting organization focused on excellence. Having set forth ATS's motto as "fueling Allmerica's competitive advantage through technology," Tranter led a recasting of technology operations.

Leadership Restructuring

Through a "legacy-surround" strategy rather than replacement, ATS centralized the existing systems of its regional insurance companies: Citizens Insurance Co. of America, which operates in the Midwest, and Hanover Insurance Co., which covers the Northeast and South. The technology organization itself was restructured into four major units. Service Delivery (further divided into applications and utility areas) delivers services and maintenance to the various lines of business. Project Delivery manages all project planning and execution-thus keeping project resources free of distraction into maintenance-oriented tasks, according to Tranter. Enterprise IT oversees architecture, data management and vendor management. The fourth unit, Enterprise Excellence group, is charged with promoting best practices in general, and in particular with ATS's adoption of CMM (capability maturity model).

Seen early in ATS' transformation as a vital measure for meeting ambitious new goals while understaffed, the quest for CMM has become a focused goal for Tranter and for Stearns, who now heads up Enterprise Excellence. "Just achieving CMM Level 3 will give us a significant competitive advantage, because we won't be cancelling tons of technology projects and wasting technology investments like a lot of insurance companies do today," Tranter says.

Crucial to the functioning of the restructured ATS is what Tranter calls an assignment-based approach, which ensures an efficient distribution of human capabilities. One of the vices of the unreformed Allmerica technology organization was a tendency to rely on outside consultants. In fact, out of an overall budget of $165 million, Allmerica's technology organization spent $64 million on internal personnel and an alarming $32 million on outside consultants. The problem was two-fold, as Tranter saw it: "Number one, the consultants were very high-priced; number two, we were paying people outside the company to build all the new stuff instead of giving those opportunities to our employees."

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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