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Management Strategies

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IT Departments Challenged in a Year of Crisis and Learning

In driving senior technology executives to do more with less, the financial crisis clarified the capabilities that distinguish the most successful insurance CIOs in a rapidly changing business environment.

The past year has been an especially trying one for insurance CIOs. The financial crisis raised new business demands even as technology officers were pressured to keep major transformational programs on track -- all while delivering every bit of efficiency possible. These challenges will doubtless inspire talented insurance CIOs to reach greater heights of achievement. But they also have revealed some of the qualities and specific choices that define successful technology leadership.

Unquestionably the insurance CIO job has gotten harder. Over the past decade the average tenure of insurance CIOs fluctuated between 18 months and 24 months, according to Joe Guastella, global insurance leader, Deloitte. In the past two years, he reports, turnover has accelerated.

Companywide programs to drive out cost and reduce head count, coupled with aggressive pushes to reposition the business in the market, have placed significant burdens on insurance CIOs, Guastella stresses. "IT capital has been frozen, capacity [IT resources] is constrained, expectations for service quality are growing -- yet the business is still encumbered by aged production systems that are high maintenance and high cost," Guastella says. "In addition the CIOs' vendor partners are also being placed under renewed pressure to sell more, provide services to their customers at a lower cost -- sometimes translated into slower response times or reduced service -- and to offer products and services at a la carte prices."

If the last economic crisis, in the wake of the dot-com bust, was somewhat a question of doing less with less, the previous year has been the true test of doing more with less, implies Deb Smallwood, founder and principal, SMA (Boston). "The demand for IT services -- that is, resource capacity and budget -- continues to grow and exceed the supply," she says. "Many CIOs were asked to cut baseline IT budgets while keeping on track with new development projects, fixing the legacy and data problems, and providing the same level of support in maintenance."

Has the Worst Passed?

While the economic fallout of the financial crisis continues to constrain insurance CIOs, however, some of the most troubling prospects have faded, believes Matthew Josefowicz, director, insurance practice, Novarica (New York). The greatest concern raised by the crisis for many insurers was uncertainty, and as that uncertainty has receded so has the crisis as a specific business driver, he contends.

"The reality of the crisis has been less troubling than the potential of it for most insurers," Josefowicz comments. "However, it has reemphasized the importance of operational efficiency and organizational agility, both of which have become top-level concerns for almost every insurer."

The crisis has also revealed the wisdom of a more proactive modernization agenda, Josefowicz suggests. "Insurers who have modernized their applications infrastructures are generally better positioned to react to rapid change," he declares.

Among the specific policies that have advantaged the more proactive and successful insurance CIOs are a focus on reducing operating costs and total cost of ownership, as well as attention to attracting and keeping top talent, according to Deloitte's Guastella. The most beneficial investments are those that simplify application, integration or data platforms, he says, and those that combine rich functionality with modern architecture yield the greatest advantage.

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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