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Management Strategies

10:28 PM
Lisa Valentine
Lisa Valentine
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RLI Asks, ’Build or Buy?’

RLI Corp. is successful at offering niche insurance products, such as coverage for contractors and neighborhood bars that many insurers wouldn't touch with a 10-foot pole.

RLI Corp. (Peoria, Ill.; $2.1 billion in assets) is successful at offering niche insurance products, such as coverage for contractors and neighborhood bars that many insurers wouldn't touch with a 10-foot pole. As a result, RLI's IT shop has become adept at quickly developing the front-end systems needed to support these unique products, while at the same time maintaining the carrier's cadre of legacy systems. The key, believes CIO Piyush Singh, is knowing where to focus the talents of the staff.

I&T: How does RLI balance its investment in legacy systems with the need to create new systems to meet changing business initiatives?

Singh: We've kept our back-end solutions but have taken some functions, such as billing and collections and reinsurance, out of the old legacy systems and moved them to newer systems. We took reinsurance out a few years ago because we felt the legacy system didn't do an adequate job at reinsurance terms and regulations. We replaced it with a brand-new system and are in the process of doing the same thing with a billing and collections system. Part of the reason we do this is that the old legacy systems vendors have been very, very slow in responding to the new marketplace. Rather than trying to retrofit an old system, we pick solutions that are well-built from the ground up and have a lot of functionality. By the time you finish retrofitting an old system, you are four years behind.

I&T: As you search for new technology solutions to replace or enhance your legacy systems, are there any underlying technologies that you look for?

Singh: We are very careful that technology does not drive system decisions. We look for the best functionality, regardless of underlying technology. We believe - and we send the message downstream - that we will have to coexist and comanage different platforms. Our endeavor is to find the best functionality, not the most compatible technology platform. We not only need to be prepared for technological diversity, but we need to encourage it.

I&T: Is it a challenge to manage all these different platforms?

Singh: It is, but at the end of the day, that's what our job is. We need to be good system integrators who can manage diverse platforms.

I&T: How do you make the "build or buy" decision?

Singh: If it's commodity software, we just buy it. If it's an application that provides competitive advantage, content enablement and significant functionality, we build it. I consider billing and collections a commodity application. It doesn't make sense for me to build it. Because our front-end submission application is truly a competitive advantage, however, we built it. Brokers remark that RLI underwriters are the only underwriters they deal with who can respond within five minutes of a submission arriving at their desk. That's the service expertise we want to enable in our organization.

I&T: How do you organize your IT staff to streamline application development?

Singh: The typical way to organize an IT development staff is to assign staff members to a business unit or particular application. But to organize the staff in that way means that I need a really large development staff. We don't have a huge development staff, so we needed to work in a different way. Our development teams are cross-functional and organized by competency. For example, we have a team that specializes in ratings and a team that specializes in bonds. We also have content leaders who build the front end of our systems and interact with the ratings team and bonds team to ensure integration with the back-end systems. We started cross-functional teams about three years ago as a way to deal with developing systems in a distributed world. The level of complexity in any single application is extremely high, and we have to be able to integrate a whole bunch of pieces on the back end to make it work. Cross-functional teams also mean that we remain flexible - we are not all hardwired.

I&T: Without a staff dedicated to back-end legacy systems, how do you handle support and maintenance?

Singh: We are now offshoring some of the legacy programming as well as some of the back-end maintenance. This has enabled us to increase our service levels to the business units but only marginally increase our budget. If it is a commodity where we do not add value, then we do not necessarily believe that we need to do it sitting here in Peoria, Ill.

I&T: What kind of governance methodologies and tools do you use for development?

Singh: We have been fairly good at how we initiate projects and determining the level of analysis we need. But we are not one of those companies that needs a six-inch binder before you start the development process. We see a lot of companies using the traditional waterfall model for development, where you define everything up front, build it, test it and deploy it. We believe in a fairly incremental iterative model. We take smaller chunks, build them, demonstrate them to the user community, then build the next chunk, demonstrate it and so on. We do have an overall vision of what we need to do, but we don't believe in the regimentation of defining everything up front before we build it. We also believe that developing IT applications is an opportunity to reengineer processes - to truly map it out, learn from it and ask, "Do I really need to do this anymore?" or, "Can we do this a little differently?" That's what provides tremendous value to the business.

I&T: How do you allocate resources between development and non-development IT projects?

Singh: We use a project management office for project governance and project allocation. We break out our resource allocation into three areas: business units, cost centers and IT-related work. We allocate a chunk to the business units, a chunk to the cost centers to keep the back office running, and a chunk to keep the IT machine humming and looking into the future. We track all our projects based on the allocations, and that tells us which ones need to bubble up first based on which ones are going to provide the biggest benefit to the organization. The user community helps us do this. At the end of the month the project management office runs our numbers. We learn which projects are planned but do not take off in a timely manner, enabling us to do some resource shifting. Every six months we meet with the executive group to say, "Here's what the planned distribution was and here's what is working out and here's where we need to tweak it."

I&T: What is the most rewarding aspect of your job as CIO?

Singh: I love the challenge. I love that we are always doing something different. I love that at RLI Corp. I sit on the executive committee rather than waiting outside the boardroom for orders. We have a charter to ensure that we are at the forefront of technology, which means that we don't wait for a business unit to come in and tell us what they need. In a lot of cases, we go to the business units and suggest ways to use technology to do what they do better. I also enjoy evaluating scenarios, thinking them through and making the right choices for the company. My team supports me tremendously and our leadership team is absolutely fabulous. We debate, we fight, but that's what brings us to the right solution.

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