Proving Information Technology’s Worth
Today, the insurance industry's top technology officers stand at the helms of leaner and more disciplined IT organizations than ever before. Hard times have made competing a more arduous challenge and have turned cost-control into a top priority - even as CIOs endeavored to provide increasingly better service to the business. But better times now appear to be upon us, bringing with them an unprecedented opportunity for technology to shape the business.
During the past few years, as technology's potential for driving business growth became better understood and appreciated by business leadership, CIOs were tasked to make increasingly greater contributions to companies' competitive profiles. The job was made harder, in that increased expectations often came without a corresponding increase in resources. However, the resource burden may have begun to ease this year, as more and more top technology officers admit to having larger budgets. In fact, many technology officers are now under pressure to spend. Still, adversity is a good teacher, and when senior technology officers do spend, they're likely to do so more wisely - and with greater effect than ever. But that's what the business has come to expect.
"The focus over the last year has been around proving the value of IT as a key contributor to business success," asserts David Holtzman, insurance practice lead, BusinessEdge Solutions (New York). "Technology executives have been expected to better understand the underlying business strategies and how their IT projects would drive significant ROI; they needed to work closer with the business than in the past and ... be a key contributor to driving new revenue."
The senior technology executive has become a consultant to the business, crafting and proposing strategic alternatives based on measurable criteria. Technology officers are typically the drivers of IT/business alignment, often to a degree that is calculated to reshape the conceptions of their business "clients."
"IT is taking a leadership role in helping the business think differently about strategies - how to realign or break up existing business models and processes in order to be more efficient," asserts Mike Adler, partner, IBM Business Consulting Services (Armonk, N.Y.).
In supporting a more business-oriented contribution from CIOs, many companies have appointed a chief technol-ogy officer who is charged with managing the technology infrastructure, according to Rod Travers, senior vice president, technology, Robert E. Nolan Co. (Dallas). "This supports the trend of making the CIO more responsible and more accountable for delivering measurable business benefits and competitive advantage from IT investments," he glosses. "The insurance company CIO is now being asked not only to develop and evolve IT strategies that align with the overall business strategy, but in fact to influence the business strategy itself through the innovative use of IT."
Free Spenders
Whether budgets are growing or flat, senior technology officers are continuing efforts to reduce the maintenance/development ratio, according to James Bolton, managing partner of Accenture's (Chicago) insurance industry group. "Increasingly, insurance technology organizations are trying to shift more of their resources from non-discretionary to discretionary spending," he claims. "They are doing the 'lights-on' work at a lower cost to have more to invest in strategic initiatives and other measures that will differentiate them from the competition."
Sourcing strategies continue to play a role in limiting operational costs. According to IBM's Adler, "A number of CIOs have been focusing on either outsourcing their application development and maintenance capability, or leveraging third parties to work with internal IT organizations to improve their capability." Adler asserts that leading senior technology officers are facing a challenge in leveraging initial forays into lower-cost resources toward strategic approaches that take advantage of multiple geographies to access needed IT and business process skills. To complement such strategies, Adler adds, CIOs are simultaneously focused on creating an IT capability - including human capital and infrastructure components - that is flexible and responsive to rapid changes in business demands.
The challenge to refine technology organizations' human capital component has been helped by the burst of the Internet bubble, relates David Garnitz, managing partner, insurance practice, DiamondCluster International (Chicago). "Importantly, insurance companies have brought in talent from outside the insurance industry, gaining experience and perspectives from industries ranging from banking and securities to consumer goods," he says.
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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