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Improving the Quality of Insurance IT Applications, Part III: Improving Software Quality at AGF-Allianz

As we recover from the liquidity crisis and face waves of new regulation, the ability to scale rapidly is critical to insurance companies. Scale enables us to spread risk more effectively, segment smartly for higher premiums, and keep costs competitive.

By Paul Camille Bentz, former CIO, AGF-Allianz

I started my tenure as Group CIO of AGF, the French arm of Allianz, at a time when AGF was merging with Allianz. Our IT organization was struggling to support the massive change while continuing to deliver an acceptable level of service. More than a thousand developers were working on software changes daily.We were in crisis mode. The first thing we did was to get the right people with the right responsibilities to the right projects. This meant focusing on processes, teamwork, and skills.

Once the worst part of the crisis had passed we concentrated on creating a concrete operational plan for the mid to long term. This was a multi-year exercise involving all the business units and the IT organization. We clearly needed changes in the governance model, and this was the next step in the plan, along with the introduction of a comprehensive and reliable management information system to explain to our business partners where the IT money went and the value these investments delivered.

As with any merger in the financial industry, large cost savings are committed to up front and IT is clearly identified as a major generator of these savings. We felt a great degree of pressure heightened by intense scrutiny from our business partners, the press, and our shareholders.

The rapid execution of the merger left us very little time to fully develop the target architecture of the merged systems. As noted above, the difficulty of merging different types of contracts forced us to run multiple systems to support the same insurance product. The merger resulted in a highly-modified portfolio of around 200 applications, exposed a lack of skills in some areas, and added substantial infrastructure costs. We had to tackle our skills shortage and escalating maintenance costs in the first part of our plan forward. By focusing on pooling our maintenance resources, prioritizing maintenance activities, and tightening up our maintenance processes, we were able to capture double-digit percentage savings in application maintenance. In particular, • We put an end to the usual one-application-one-support team scenario where headcount is always in excess and procedures tend to be local. • The early segmentation of errors reports helped us to concentrate on high priority problems and improve the user experience. • Maintenance budgets (OPEX) were aggressively reduced to avoid money spent on changes which could (and should) be managed under the CAPEX budget. A significant savings of 15% was obtained in just one year with external help to monitor the change and the savings. An interesting feature was that the consultancy had 100% of its fee at risk, to be paid only if and when the results were delivered!

Our next challenge was to manage the large volume of business demand while keeping operational expenses going down. We tackled this challenge by focusing on the size and quality of the application portfolio. To do this we took a two-prong approach:

• We classified and described the portfolio in a systematic manner both from a business perspective (size of business, meeting requirements, and compliance to regulations) and a technical one (durability of technical components, total cost of ownership including infrastructure, and operational reliability) • We created portfolio rationalization scenarios to retire, modernize or re-architect the right mix of applications with a detailed ROI for each scenario.

While doing this rationalization exercise it became clear that we needed to measure and benchmark the size and quality of the applications in our portfolio. To do this, we used the CAST Application Intelligence Platform (AIP). The CAST AIP gave us precise measures of the size, quality, and complexity of our critical applications. It highlighted hot spots of cost and value leakage due to poor performance or lack of modifiability. It was automated and required very little administrative intervention once set up. In addition to providing us with automated application intelligence - information that we could act upon to make effective rationalization decisions - the CAST AIP adheres to the world-wide ISO 9126 standard for defining application quality attributes, giving us the ability to benchmark our applications consistently, year over year. We also utilized the CAST AIP to define and measure application quality and size, providing us with deeper insight than traditional static code analysis products. As a result of our portfolio rationalization, we achieved another double-digit percentage reduction in our running costs, including the operating cost of our infrastructure.

To monitor and control application quality, we gave our development teams access to the CAST AIP. This enabled them to monitor the quality of the software they produce against clearly defined quality targets. By precisely pinpointing the root causes quality lapses, our developers now had a way to find problems early and fix them once and for all.

Having precise and objective quality measures also enabled us to create more effective SLAs with our provider of infrastructure services. It gave all our stakeholders, including business unit general managers, a common language and one view of the truth about the cost and business value of the application portfolio.

This one view of the truth that is easily accessible to all stakeholders was (and continues to be) essential to managing the large transformation of our application portfolio. The application quality approach, combined with a process maturity improvement program (CMM), created a solid foundation for continuous productivity improvement.

I retired from my post of CIO of AGF-Allianz in 2007 but still stay in touch with my former colleagues. It pleases me to see that the plan we forged and executed to manage the large merger continues to deliver strong IT and business results. It is helping us thrive in these difficult times.

The savings achieved over 5 years reached more than 30% of the IT budget. Moreover, and perhaps more important, we delivered an organization in better shape at the end the process, able to move forward with pressing business initiatives and well prepared to face another crisis.


As we recover from the liquidity crisis and face waves of new regulation, the ability to scale rapidly is critical to insurance companies. Scale enables us to spread risk more effectively, segment smartly for higher premiums, and keep costs competitive.

But scaling, whether it is through M&A or organic growth, requires a new level of responsiveness and cost efficiency from the IT function. At the same time, it adds a substantial amount of complexity to the very applications that must turn these business goals into reality. The fundamental tension between more complex, yet more responsive and cost efficient has to be dissolved if our business goals are to be achieved.

At AGF-Allianz we dissolved this tension by focusing on measuring and monitoring application quality throughout the life cycle. It enabled us to simultaneously become faster, cheaper and better.

About the Author: Paul Camille Bentz joined AGF in April 2000 to head the IT organization following the merger of three insurance companies acquired by Allianz. The merger was followed by a rationalization program to reduce dramatically the costs of IT while delivering new solutions. He then served as Regional CIO for Allianz, advisor to the Chairman of AGF, and member of the Allianz Executive Board. Before AGF, Paul was CIO of Paribas, where he implemented a global organization with more than 2100 staff worldwide to support all the business areas of the Investment Bank. Paul also served in IT leadership roles for Credit Lyonnais and Air Liquide in several European countries over the course of ten years. He retired from Allianz in 2007 and now runs his own consulting company, while spending time with his wife, three children and three grandchildren. He can be reached at [email protected] .As we recover from the liquidity crisis and face waves of new regulation, the ability to scale rapidly is critical to insurance companies. Scale enables us to spread risk more effectively, segment smartly for higher premiums, and keep costs competitive.

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