2009 will be a year of unprecedented change in the insurance landscape, and IT strategies will be at the heart of driving that change. One of the most immediate impacts of the recent crisis -- regardless of an individual company's market position — is a closer alignment between the business and IT. In the past, the dynamic tension between these parties was characterized by the business looking for IT to meet a raft of requirements and to deliver everything as demanded within a reasonable budget and time frame.
Now the two need to work with a common currency — outcomes. Both parties must work together to clearly identify, commit to and ultimately deliver measurable value across lowered IT costs, schedule/budget compliance and true bottom-line business value. To achieve this, three strategies are emerging:
1. Investment reprioritization. IT is perpetually in a "do more with less" model of planning. But the pressures created by the current financial and economic situation have exacerbated the situation. As a first line of defense, IT strategy is now starting with a thorough reexamination of the slate of current projects, initiatives and investments. Current spend is being put under the microscope in order to ask and answer three fundamental questions:
* With this initiative, will my business fail — either in the face of the customer, profitability or regulation?
* Will this initiative meet a compressed payback threshold, and do we have the right metrics in place to determine success?
* Will this initiative enable the company to take advantage of current market discontinuities and/or position the company for growth after the downturn?
The result of this examination typically creates a highly focused agenda with fewer, large-grain and strategic initiatives, supported by mission-critical spend. A byproduct of this alignment, however, is a raising of the stakes for success. Failure, even if characterized by a small miss on budget or business case, has a more significant effect.
2. Focus on delivering sustainable cost reduction. The projects left in the plan for 2009 will need to deliver more than new end-user functionality or an upgrade to the latest technology stack. The focus will be on delivering initiatives that can drive true sustainable cost reduction, in the form of lower cost of ownership, lower processing unit cost and/or ease of maintenance. This should come through simplification of the IT environment — consolidation of platforms, standardization of technologies, etc. In the past, it was tolerable to layer on new capabilities while compounding the complexity and cost of the underlying environment. In the drive to achieve new lower costs, these layers must be stripped away through consolidation, replacement and decommissioning.
3. Igniting engines for growth. While the analysts tend to focus largely on the negative aspects of the current times, the market discontinuities create opportunities for forward-thinking companies. IT strategies should not be focused solely on survival and cost reduction, but also on capturing those opportunities. These may come on the customer side with improved analytical insight to attract and retain key customer segments. They also may come on the processing side, to improve ease of doing business and/or handle volumes of new submissions.
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