Callahan Slashes Expenses, Boosts Strategic Activity

In the '50s, when kids in New York City were brandishing affinities for the Dodgers, Yankees or Giants, a 12-year-old Dennis Callahan, after school and on Saturdays, was busily hacking away on computers. Callahan, who rooted for the Yankees (and still does with just as much fervor), wasawarded National Science Foundation grants through Columbia and St. John's Universities, before most Americans had a color TV.

To say that the young Callahan—who also enjoyed model trains, stamp collecting and handball—was ahead of his time is a huge understatement. "In the late '60s, I was in my early 20s and had 10 years of experience in computers," relates Callahan, who grew up to be senior vice president and chief information officer, Guardian Life Insurance Company of America (New York, $32 billion in assets). "That experience made me somewhat attractive and unusual, so I succumbed to a career in information technology."

Despite his early immersion in computers, Callahan, who holds a bachelor's degree in mathematics, planned on becoming a math researcher and educator. He started his collegiate career at MIT but had to drop out because of illness. A determined Callahan finished what he describes as a well-rounded education at New York University. Although he started working towards a computer science master's degree, the scale of his interest was tipped toward other work he was doing at the time. "I was so turned on to the financial services products created at Standard and Poor's," explains Callahan. "I decided to put all of my energy into that."

IT Expenses Down 17.5%

Luckily for S&P and a long list of other employers that followed, including Goldman Sachs, Wellington Management, Fidelity and AIG, everything that Callahan touches seems to turn to gold. Just ask his current employer, which charged him with driving Guardian's expenses down through more effective use of financial and human resources. Not only has he reduced his IT expenses by 17.5 percent from 2000, but, at a time when many CIOs are struggling to keep their heads above water, he is driving new enterprise architecture, data warehouses and field technology initiatives that "were not even contemplated two years ago," he reports. Additionally, Guardian's 2003 expenses are expected to be down a whopping 21.5 percent from 2000. "While Guardian has cut the spend," explains Callahan, "it has not cut the activity at all—that has actually increased."

IT dollars are available for strategic spends because nine percent of the budget, for instance, is saved by outsourcing IT functions offshore to Patni (Mumbai) and Covansys (Farmington Hills, MI). Callahan stresses the importance of management and control of functions that are outsourced.

What makes him an expert? Callahan has been outsourcing IT functions offshore for 20 years. In fact, he was the one who sold Guardian's business segment heads on the idea. So impressed was Guardian's CEO, Joseph Sargent, with Callahan's outsourced cost-cutting measures, which include programming and desktop support, that he's given the CIO a mandate to drive exploration of outsourcing corporately for business processes. Currently, event planning, travel services and cash management are outsourced.

The economic downturn has not affected Callahan's approach to spending because he began employing cost-cutting techniques at a time when many CIOs were spending generously. "When I came to Guardian in 2000, I was given a charter to drive change faster and higher and turn around a 30 percent growth rate," says Callahan. "CIOs are doing today what I had a 12- to 18-month head-start on." Among his cost-cutting measures, Callahan counts the building of substantial vendor relationships with companies such as IBM, Microsoft and CSC, "so that they will be aggressive with Guardian on price."

Additionally, Callahan keeps Guardian's IT organization lean and mean by staying attuned to the business needs. He says this involves building good relationships and communicating well with business executives who don't understand technology, as well as those who don't want to understand it. Callahan's effective business/technology relationship building is the means by which he arrives at the most satisfying part of his job: "having a pervasive and positive business impact."

Implementing the right kinds of projects to arrive at that end, however, is a challenge. "It's been my experience that in any given year you wind up doing 70 percent of projects planned and 30 percent of things that might not have been contemplated at the start of the year. You need to constantly rebalance the portfolio based on the priorities of the day," he says.

Guardian's IT organization, according to Callahan, is careful to prove that projects will reap justifiable returns. Currently proposed plans must undergo an end-to-end business case process to ensure payback. This way, Guardian "knows exactly where it stands. If we see variance we will reexamine the ROI," he explains. Guardian has installed the Primavera (Bala Cynwyd, PA) enterprise project management suite and integrated it with the insurer's financial systems. "We've built a jet plane and have instrumentation in the cockpit," according to Callahan. "That makes us confident that we will arrive where we want to arrive, when we want to arrive."

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DENNIS CALLAHAN

Senior Vice President and Chief Information Officer, Guardian Life Insurance Company of America

SIZE OF IT STAFF: 525 firm-wide.

INTERESTS/HOBBIES: Theater arts, wine collecting, wine Internet groups, church discussions and social activities.

LAST BOOK READ: "Insomnia," by Steven King