As an undergraduate at MIT and New York University, Dennis Callahan majored in mathematics. So, it's not so surprising that the CIO of Guardian Life Insurance Company of America has been so successful at focusing on the numbers at the New York-based insurance company.Since he took the CIO position in late 2000, Callahan has reduced the IT budget at Guardian by one-third-all while modernizing the entire corporate infrastructure.

What is surprising, however, is that Callahan credits much of his success with a quality you might not expect a "numbers guy" to have: his ability to build relationships.

"To me, aligning IT with the business is primarily about building relationships-earning and keeping credibility," says the former AIG executive who spent many years of his career in the capital markets at firms including Fidelity, Wellington Management, and Goldman Sachs.

"When I came to Guardian, I made a point of spending time with the people who were running our businesses-learning about their businesses, learning about the systems that supported their businesses, identifying opportunities with them to add value to their businesses, and then getting the resources to execute on the projects we identified."

Three-legged stool

Callahan says "aligning IT with the business" is just one leg of his three-legged stool analogy for achieving his goals. The other two are "running IT as a business" and "technology."

This is when Callahan gets into the numbers.

Since he came on board at Guardian, Callahan has established tight governance over IT management and expenditures. For example, he set up an enterprise project management office and instituted a business case process that requires all IT projects exceeding $100,000 to go through a formal ROI and achieve a three-year payback.

He reduced the number of outside consultants doing development work from 65 to 10. He renegotiated contracts with remaining providers to leverage those relationships. He has sent roughly 40% of IT development work and several business processing activities to offshore companies. He upgraded the skills of Guardian's IT project managers. He even publishes an IT annual report.

"For most large organizations, IT is one of the largest-if not the largest-discretionary expense," says Callahan. "You've got to be responsible and effective in how you spend it."

Responsible and effective IT management begins with the business case process at Guardian. "You have to approach IT as an investment, establish objectives, and those objectives turn into numbers," he says.

How do you build a business case? Callahan offers the following questions as examples: What are we going to save? What new products are we going to launch? What are we going to earn? What are we going to replace at a lower cost? What are we going to be able to do faster? What are we going to be able to do with less labor? By how much are we going to lower the average call center rep's time with a customer? How many more customer service calls will we address?

"All these things are quantifiable," he says.

Real-time applications

The third leg of the stool is technology, and Callahan realized as soon as he joined the firm that Guardian had to move away from legacy, batch applications-and it had to move quickly. "Our product development, product distribution and customer service, in particular, needed more effective, real-time applications," he says.

It didn't take him long to get the infrastructure changes rolling. In the spring of 2001, after being on the job for only four months, Callahan began setting the stage for a component-based, service-oriented architecture to replace Guardian's legacy operations.

He spent a lot of time with Joe Sargent, the CEO at the time, and COO Dennis Manning-who is now the CEO-educating them about enterprise architecture-what it is and its benefits. He also had to convince the executives who ran the businesses that the change would benefit them as well. After all, they'd be taking a corporate allocation hit for the eight-figure investment.

"This was not a trivial expenditure," says Callahan. "So I had to sell it based on the value it would add in terms of our effectiveness as an IT organization-in getting more done with less. The phrase I used at the time was that I was 'signing in blood' that we'd deliver."

By October of the same year, Callahan's enterprise architecture sales job reached fruition with the top brass-and the company proceeded to implement the new technologies in a multi-year, phased plan that concluded last March.

Fortunately, Callahan didn't have to shed any blood either. He had kept his promise: Even before the technologies were fully implemented, the investment had already paid for itself.

In fact, Callahan says Guardian reduced its HIPAA development costs by 75% by using the toolset incorporated in the new infrastructure. Many programming "components" can be reused, which saves IT resources and speeds time to market with new products and services.

In addition, Guardian's business units now share content across the enterprise for better customer service. "We now have a data warehouse and business intelligence in place that enables us to cut across the legacy bowl of spaghetti we used to have," he says.

Other technologies installed under Callahan's watch include: enterprise project management; Guardian Online-the company's Web initiative; an agent wireless alert system; a field rep compensation modeling system; a customer relationship management system and straight-through processing for the individual life business; a new administration system for annuities; a consolidated proposal system for group insurance; a new broker-dealer books and records system; a new disaster recovery and business continuity infrastructure; upgraded call center computer-telephony integration and voice recognition; PeopleSoft financials; a grid-supported hedging actuarial and accounting system; and numerous enterprise security technologies, including access management and e-mail archiving and record retention.

The company also has launched a corporate intranet to communicate across the businesses and within IT. It's a "one-stop shop" for documentation on all the company's IT projects, says Callahan.

"A key aspect of relationship-building is communication," the CIO says. "I work very hard to make sure that I and my senior people communicate effectively and often with the businesses at all levels."

Philosophically, Callahan's approach to communicating is the antithesis of the "old mushroom theory" of management, he says. "I'd much rather get the word out and have everyone understand what's going on broadly across the organization. People working here are adults. They can decide what interests them enough to read and what doesn't. But I look to reach people in every way we can."

  • Name: Dennis S. Callahan
  • Title: Executive vice president and CIO
  • Company: Guardian Life Insurance Company of America
  • Years: 5
  • Guardian Life Insurance Company of America
  • Headquarters: New York
  • Net Premiums: $37.2 billion (2003)
  • Employees: 5,000
  • Products: Life, disability, health and dental insurance, 401(k) plans, trust services

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