Fireman's Fund Insurance Co. has embarked on the third and final step of an IT transformation, marked by a $94 million, 10-year deal with IBM to convert the carrier's network to a service-oriented architecture. The initiative comes on the heels of Novato, Calif.-based Fireman's Fund's outsourcing of the management of its IT infrastructure to the Armonk, N.Y.-based vendor and transfer of telecommunications management to AT&T (Basking Ridge, N.J.).
The result of the initiative, already under way, will be what IBM touts as an "on-demand" infrastructure built on the vendor's Insurance Application Architecture template and relying on its Business Consulting Services (BCS) arm's Component Business Modeling consulting process to cull the carrier's essential application functionality. The initiative is projected to result in the consolidation of as much as 70 percent of the insurer's applications. Expected benefits include increased efficiency and flexibility, which will be measured in service improvement, market agility and efficiency gains valued in the neighborhood of $200 million in excess of the initiative's costs over the life of the contract.
Fireman's CIO Fred Matteson characterizes the carrier's recent moves as a radical approach to transcending legacy limitations. Having inherited an organization in which 80 percent to 90 percent of the budget was oriented to legacy technology, Matteson says, in order to modernize service delivery, he had two options: bring in new staff and technology, or consider "whether there were partners out there to help get us through this faster."
Building New Models
Matteson says the current effort will help Fireman's Fund reduce the size of its infrastructure and move to a more variable-cost model. "I'll be able to take the savings and reapply it to the operating model in IT," he says. Matteson notes that while Fireman's Fund has contractually committed $94 million to the initiative, actual spending is likely to be about $157 million.
The resulting model will be a departure from traditional IT/business interaction, according to Matteson. The old way is a "sequential" process in which business analysts hand over technical specs to developers. In the new model, business concepts will inform a process whereby "people define and build groups of services put together in ways to solve business problems," 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