Secrets of the Budget Masters Revealed!

What are some of the strategies insurance tech executives use to manage their budgets? Seven industry leaders reveal how they're maximizing IT dollars to keep their firms competitive.

Make Room for Investment

Robert Fullington, CIO, Life of the South (Jacksonville, FL)

The role of a CIO is to maximize the business value of technology. Tight budgets have placed a real challenge in meeting this role, but not an impossible one. In order to extract the best value that we can achieve from our budget, we use a concept called portfolio management. This provides us with a tool to accomplish the following:

-- Achieve extreme short-term results (usually ROI in a three- to six-month period).

-- Attain critical savings run rate in current year.

-- Use project management for all projects.

We have divided the our portfolio into three classifications:

-- Run the business—Our core/infrastructure processes.

-- Grow the business—Discretionary spending and current business line growth.

-- Transform the business—Our R&D process.

Our strategy is to push the cost down on ""run the business"" as much as possible through renegotiating contracts, looking at used versus new equipment, standardizing desktops, reviewing maintenance contracts, and reviewing asset life cycles and their value as it relates to productivity and activity costs. Driving these costs down allows us to make room for our investments in growth and transforming business activities. This is all part of our asset portfolio management process.

Our project portfolio management will map project value back to key business drivers. If it doesn't meet this requirement, then the project is not considered. Other requirements are ROI, level of risk/reward, and capital expenditure.

Our human resources portfolio reviews the necessary skills needed to accomplish our projects. Our customer/partner portfolio focuses on moving our customers to the lowest-cost transaction channels with the help of our partners. This drives down the overall cost of doing business while we drive up customer service.

Our process integration portfolio determines which processes we should automate. This is an ROI process that is built on productivity and efficiency. Our content management portfolio is directed to providing understanding of the business and information. This is a decision-support system that requires a specific ROI hurdle.

We are looking to invest in areas where we can extract a good ROI, while maintain a good level of risk/reward. The ability to reduce costs at the infrastructure level and put it into value-added projects will determine the success of our budget strategy.

Establish Financial Controls

Dennis Callahan, SVP/CIO, Guardian Life Insurance Co. (New York)

Aligning funding decisions and business priorities is of paramount importance, and this is done through a close partnership of the CIO and profit center leadership. Together, we oversee budgeting, project prioritization and implementation. The CIO, along with the IT planning and CFO staff, works closely with the senior management team on cross-profit center funding prioritization for all firm-wide IT activities.

One of our major initiatives, a component-based enterprise architecture, is already having a significant impact on our ability to leverage spend across the company. This initiative includes the acquisition and integration of enterprise portals, a content management system, and device-independent wireless capabilities.

Complementary efforts are underway to reduce costs and enhance performance through a consolidation of our infrastructure and an upgrade of disaster recovery/business contingency facilities to protect infrastructure investments. Guardian's IT organization also has a commitment to strong financial management. Under the CFO, numerous financial control processes have been established. Our business case requirement was initiated for projects with costs of $100,000; paybacks are calculated, and both expenses and ROI are monitored both throughout and post-implementation to ensure that they are achieved within three years.

Other financial control efforts center around minimizing costs, primarily via strong vendor management. We leverage consulting relationships with preferred vendors and offshore partners. Requirements for contract negotiations are based upon the entire organization to ensure we meet diverse needs and prevent duplication. We have also aggressively renegotiated contracts to secure the highest-quality services for our home and field offices at the lowest possible costs.

Create Standard Platforms

Phil Folz, VP, IT Budgeting & Expense Mgmt., Chubb & Son (Warren, NJ)

At Chubb, maximizing our IT dollar involves the employment of four basic strategies:

1. Integrate IT into the business areas supported:

Our IT application developers are integrated into the business areas they support. Integration is coupled with a governance and budget process during which portfolio views categorizing budgets into ""run-the-business"" functions and discretionary projects are created. All projects are then prioritized/funded based upon supporting ROI analysis. The governance groups meet regularly throughout the year and make mid-course adjustments to the IT portfolio as needed. The result: 72 percent of projects are completed on time and 85 percent come in on or under budget.

2. Create standard processing and network platforms with centralized management:

We established a centralized core IT group, comprising approximately 50 percent of the budget and consisting primarily of infrastructure areas, responsible for establishing and maintaining Chubb's standard platforms from the desktop to the mainframe and network.

We allow for significant variability in the development of each application, but all applications must be built to run on our standard infrastructure platforms. Recently we've implemented a services review process between the core IT areas and their integrated IT counterparts to:

-- ensure the objectives of the areas are aligned;

-- discuss the delivery of core IT services to Chubb's business areas; and

-- develop demand-management strategies around key services in an effort to further maximize cost efficiency.

The result: We've slowed the rate of growth of infrastructure and taken a lot of the guesswork out of predicting and managing infrastructure expenses.

3. Manage vendors:

We have a centralized vendor-management group whose purpose is to ensure that we receive the best possible pricing and related terms and conditions on any agreements with outside vendors. Our mantra is, ""Demand a lot, get a lot, pay on time.""

4. Communicate results to Chubb's policy team, our internal clients and our employees. We report progress via our intranet-based Balanced Business Scorecard.

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