Northwestern Mutual Able to Stay the Course on IT Investment, Recession Notwithstanding

At a time when many life insurers are struggling, Northwestern Mutual (Milwaukee, Wisc.; over $21.9 billion in annual revenue) has managed to maintain AAA ratings with a stable outlook from all four major rating agencies, due in significant measure to a long-term perspective that differentiates the carrier from its competitors, according to CEO Edward J. Zore, commenting in a June 30 company statement. The same philosophy contributes to a stable technology investment environment, asserts Karl Gouverneur, vice president and chief technology officer, information technology and services, Northwestern Mutual. "Our technology investment approach hasn't changed as a result of the economic crisis," he comments. "We are a conservative, financially strong organization that does things the right way because we always look at the long term."

Northwestern Mutual remains committed to strategic initiatives in areas such as customer centricity, straight-through processing and the carrier's distribution system, according to Gouverneur. However, he acknowledges that the current business environment has resulted in the company's taking an even more cautious, deliberate approach in discretionary technology investment. "Now, more than ever, all projects must have tangible business value," he comments.

The criteria for investment remain the same, Gouverneur insists. Initiatives are categorized as either innovating the business, being necessary for running the business, or optimizing a given area of the business, he says. "Everything can't be innovative, everything can't be product-related, etc. — we look to run a business technology portfolio that is well balanced," he remarks. Initiatives are also ranked according to business value, revenue potential and risk profile.

The selection of initiatives is determined by the company's Prioritization Committee, which consists of executives from across the organization. The Committee, which is run by corporate planning, unites for one major annual meeting in early fall and has smaller meetings monthly. "We made a decision several years ago to take the process out of IT," Gouverneur states. "Members from IT's executive team participate in the process along with all parts of the business."

In addition to balancing the types of initiatives, the Committee takes great care in arranging the order in which projects are executed, according to Gouverneur. "Not everything starts at the beginning of the year," he says. "We have a good balance of projects throughout the year that let us spread our architecture and execution skills optimally over time."

Beyond continued commitments to major strategic initiatives, the type of projects selected has been conditioned to some extent by the current economic situation, Gouverneur acknowledges. In the present environment the company is more focused on efficiency plays, such as server virtualization and leveraging its relationships with outsourcing partners. Some prominent ongoing initiatives include a customer master data management effort; straight-through processing-related work in the new business area; infrastructure modernization, including database and operating system upgrades; and some internal Web 2.0 projects directed at fostering collaboration. The carrier has also enabled its network of financial representatives to use LinkedIn and Facebook in compliant fashion, Gouverneur shares.

Northwestern Mutual has also revisited relationships with all its vendor partners to optimize value, according to Gouverneur. "We have taken a look at the terms and pricing of our relationships and also the status of each relationship," he says. "We identify opportunities where we can either grow or contract the relationship, and we have restructured the process by which we deal with vendors."

Northwestern Mutual now categorizes vendors as strategic, operational commodity and niche in order to clarify the nature of the relationship and optimize commitments from an investment point of view. Gouverneur explains: "'Operational' refers to a big vendor in terms of dollars and footprint, but one who could be replaced easier than a strategic partner; commodity is money for invoice — I get an invoice and I pay you, and if you don't meet a service level, I call support; 'niche' is somebody who is important to us but there aren't a lot of dollars flowing their way." The categorizations serve to separate the strategic partners from more interchangeable suppliers and ease the process of optimizing the full portfolio of vendors.

Gouverneur stresses the importance of maintaining a win/win ethos amid changing vendor relationships. "You can't squeeze all the profit out of the relationship or they won't be a partner when times are tough. I'd rather say, 'Vendor X, why don't we work on understanding what it is you're trying to accomplish and see whether we can grow that capability.' Both sides should remain flexible and work together to optimize the relationship in a tough budget environment. It is a partnership and should be treated like one."

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