The effect of the financial crisis on IT/business alignment was among the topics addressed by a panel of insurance carrier executives, analysts and vendor representatives in a Tuesday, Nov. 11 ISOTech general session entitled "Suits vs. Geeks: Who's winning the battle between business and IT?" held in Las Vegas. Addressing the premise that insurance carrier technology executives' relationships with their business counterparts are "as contentious as ever," Donald Light, a San Jose, Calif.-based senior analyst with Celent asserted that there were reasons for optimism. More and more CIOs enjoy a "seat at the table" with senior management setting strategy, according to Light.
"It's becoming more unusual to find resistance to talking technology at a high level," he added. "Business executives are coming to grips with what IT can do for their enterprise."
Better governance has also helped the IT/business relationship by fostering greater dependability of delivery and increased transparency of cost and benefit, Light argued. However, problems persist, he added. For example, business leaders are still hard-pressed to understand the costs of large infrastructure investments that lack "hard" ROI for any given business unit. CIOs bear some responsibility for misunderstandings because of their tendency to think and communicate in terms of IT concerns, according to Piyush Singh, senior vice president and CIO of Great American Insurance Group (Cincinnati). "We'll say, 'Our Citrix is OK' or 'our thin client is all right'—we don't address it as a business issue," Singh said.
It is vital that CIOs think and talk in terms of business issues because of the role IT can play in the evolution of the insurance enterprise, Singh suggested. IT plays two core, integral roles, according to Singh. First, it can drive innovation by providing the means of creating new business models. Second, IT must drive integration. "We need to look across business functions and find commonalities and streamline processes," he said. "IT is the de facto center to make this happen."
CIOs must constantly do a balancing act between serving the business user and protecting the integrity of the IT asset, argued Chuck Johnston, vice president, strategy and alliances, Oracle Insurance (Redwood Shores, Calif.). As with toys and children, if business users are given carte blanche to use an IT asset, Johnston said, "they will abuse it and eventually break it."
Technology executives serve as a steward of IT assets, capable of prudently delivering maximum functionality to the business while maintaining the integrity of those assets. In discharging that duty, they should endeavor to put as much control into the hands of the business, Johnston asserted. Ideally, "the best course for IT is to eventually go back to being a utility," he said. "Changing business processes is in many respects more of a business [than an IT] problem." Novarica's (New York) Matthew Josefowicz, director, insurance core team, also struck a note of optimism for the IT/business relationship, arguing that surveys demonstrate the two sides are increasingly coming together to solve problems. It is natural, if not inevitable that they do so, he suggested, because "insurance is an information business: insurance companies communicate and analyze information, and executives are realizing this."
A certain amount of friction between the parties goes back to the disillusionment of the dot-com bust, according to Josefowicz. The threat of Y2K and the competitive imperatives associated with the emergence of the Internet led business executives to think, "If we don't throw ungodly amounts of money at IT without asking questions, we're all going to die," Josefowicz jested. Unsurprisingly, there was a backlash following the bust, leading to a new attitude on the part of execs: "I never want to hear from you again, and I'm cutting your budget."
However, that hostility is unsustainable in an information-driven business, where the IT/business relationship is one of interdependence in the service of the creation of business value, Josefowicz reasoned. Nevertheless, CIOs still struggle to communicate the value of their efforts through metrics, he added. The metrics themselves pose problems, he argued. For example, pure cost metrics, such as per policy costs or percent of net premium, tend to present IT as only a cost center. Similarly, performance metrics, such as service level metrics are all measurements of failure, as they measure the departure from perfection. It would be as if underwriters were subject to criticism for every policy claim, Oracle's Johnston later remarked.
To remedy the negative impression created by pure cost and performance metrics, CIOs should present "value metrics" that demonstrate the business value created by IT as a part of return on investment. "IT needs to be able to present itself on those grounds," Josefowicz recommended.
CIOs also need to be alert to the social dimension of success, cautioned panelist David Lawless, senior vice president and chief administrative officer, Magna Carta Companies. "You can measure the success and failure of an IT project on the basis of acceptance," Lawless submitted. "Pay attention to the social aspects of any program you attempt to implement—that may affect you more than any other dimension."
Perhaps a more meaningful social dimension was enduring suspicion and disrespect toward IT on the part of business executives, suggested Judy Johnson, vice president and principal solutions architect, Patni Americas, Inc. "I'm here to defend the 'geeks,'" she said.
Mutual bad-mouthing of business and IT may have become taboo in common circles, but within their own respective ranks it may be chronic, Johnson lamented. In the war between the geeks and the suits, she said, "nobody's winning, and there's been tremendous collateral damage on both sides."
Among the reasons for the perpetuation of the 'war' are that the business leadership does not give IT executives comparable incentives and compensation, Johnson argued. Also, business tends to blame IT for a lack of alignment, while not taking responsibility for its own part. "IT people have spent a lot of time in self-examination but business hasn't gone through the same gut-wrenching exercise," she claimed. Johnson predicted that the business would use the current economic crisis to excuse its delinquency in this respect; they will argue that, "We are so busy with issues related to the financial crisis that we don't have time to deal with IT alignment issues, she explained. "They cannot be allowed to get away with this obfuscation," Johnson insisted.
At all levels of insurance companies there was a failure of the business to listen to IT and a tendency to dictate, Johnson asserted. However, "alignment is not a matter of taking orders well and executing flawlessly in a command-and-control world," she insisted. "Alignment is about respect and equality."
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