Insurance & Technology is part of the Informa Tech Division of Informa PLC

This site is operated by a business or businesses owned by Informa PLC and all copyright resides with them. Informa PLC's registered office is 5 Howick Place, London SW1P 1WG. Registered in England and Wales. Number 8860726.


12:42 PM
Connect Directly

Building IT for the Customer Economy

At Prudential Financial, Barbara Koster is working to make IT nimble to respond quickly to customer demands.

In the new customer-driven economy—where companies must provide products in response to customer demand rather than provide products and hope customers will buy them—insurance companies are at a disadvantage, since new product development is a lengthy task.

That's why Barbara Koster, senior vice president and chief information officer of Individual Life Insurance and Retail Distribution at Prudential Financial, cites overcoming lengthy product development times as her greatest challenge.

"The customer is now driving changes in technology and products," Koster says. "Today, customers drive the need, rather than insurers just providing products. A successful IT department has to have an environment that will be able to buy, build and integrate technology quickly in order to provide rapid introduction of products to the marketplace."

At Newark, NJ-based Prudential Financial ($371 billion in assets), Koster is working to make sure IT is ready to respond to changing customer demands. "We are developing an entirely component-based architecture," she says. "No longer do I have to build everything I need. We can go out and buy products already on the marketplace and integrate them with our existing systems. That really speeds things up."

Shift to Components

The component approach is a drastic departure from Prudential's previous IT architecture, where even three years ago, 90 percent of the IT was built internally. "In the old days, everything was integrated into one monolithic system," Koster says. "It was very difficult to pull something out or plug something in." As a result, Prudential was forced to build most systems—causing long, costly development cycles. "Today, we are about 50/50 when it comes to buying and building technology."

Another trend at Prudential that Koster has overseen in her five years at the company is the increased use of outsourcing. "A few years ago, all of the people working on IT were Prudential employees," Koster says. "Today, we have reduced Prudential's staff and we have outsourced some operations to acquire the expertise we didn't have internally." Prudential now has about 1,800 people working on its IT systems, but that number includes consultants, Prudential employees, employees with IBM (Armonk, NY) and Tata (Mumbai)—Prudential's two large IT outsourcing partners—and employees at Prumerica, Prudential's offshore IT development firm in Ireland.

"We have about the same total number of professionals working on projects today," if the outsourcingpartners are taken into account, Koster adds. "Plus, a Prumerica employee costs about 50 percent less than an employee in the US."

However, Koster also emphasizes that a successful IT operation must focus on finding a balance between developing internal employees' capabilities and outsourcing. "You have to re-tool staff to work on new technology," she says. "Prudential's existing IT staff is very knowledgeable in insurance. You have to give your staff the opportunity to work on new technologies."

Retraining staff is also a great way to improve retention. "From a retention point-of-view, training is crucial," Koster adds. "People sometimes want to work in new areas." Another way to improve retention and keep the group attractive to new hires is to keep the IT teams in touch with the company's strategy. "The staff has to know and understand the strategy of the company. They have to understand how their job fits into the strategy and how each unit is needed to reach the goals.

"Technology is an enabler," Koster continues. "The IT staff has to understand what it is trying to enable. As an employee, it helps to know what the target is so you can understand what you are aiming at." In order to keep all IT staff members "in the loop," Koster holds monthly town hall meetings with the IT staff. Technologists are also invited to attend business-focused town hall meetings to see how that side of the company is approaching challenges.

Town hall meetings are also a good way for Koster to get to know more of the IT staffers. "From a management perspective, knowing each employee is important," Koster says. "Even with a staff of 1,800, town hall meetings are a great way to get to know more staff. I may not know every name, but I can recognize most of them."

Understand the Business

As a former "techie," Koster knows the importance of having the IT side understand where the business side is headed. "I started as a programmer," programming then-cutting-edge CICS and DB2 technology, Koster says ironically. "Now I am a business person who enables technology.

"But it is important for a technologist to understand why you are writing a line of code," Koster adds. "You have to understand the business problem before you can solve the problem with technology. Today, a lot of kids write the code first without understanding what it is supposed to do."

In fact, Koster says her next career may just be getting new technologists to understand the importance of the "big picture." Many new entrants "have gotten away from understanding how the technology works together," Koster says. "In order to be a true technology executive, you have to understand how it all works. If you don't, you won't be a technology executive."

Part of the learning process for technologists, as well as for CIOs, is to understand the older technology environments. "The older systems...will play an important role in future technologies," Koster says. "You just can't be an expert on the new technologies. You can be a Java specialist, but you have to understand how the information is getting to you from the older systems. Understanding it will help make you a better Java programmer."

For Koster, understanding the business is not really a problem since she is consulted during the very early stages of any business initiative. "At Prudential, I am part of the business strategy from the beginning. Coming in late was the old paradigm. I spend a lot of my time forming strategy and product development planning."



Senior Vice President & CIO, Individual Life Insurance and Retail Distribution
Prudential Financial

IT Budget: $400 million

Size Of It Staff: 1,800 (including outsourcing)

Interests/Hobbies: Reading, bike riding, a big fan of the beach. "I love to spend time with my two daughters. They grow up too quickly. We do a lot of things together."

Key Quote: "The customer is going to drive the changes in technology."

Greg MacSweeney is editorial director of InformationWeek Financial Services, whose brands include Wall Street & Technology, Bank Systems & Technology, Advanced Trading, and Insurance & Technology. View Full Bio

Register for Insurance & Technology Newsletters