With a $900 million annual IT budget spread across 14 business units, Nationwide Financial Services cannot afford a lot of duplication and misguided spending. However, the Columbus, Ohio-based insurance giant also needs to encourage and fund cutting-edge technology deployments to maintain its market leadership.Over the years, insurance companies have made many attempts to rein in the growth of their information systems. To promote standardized architectures, IT executives have attempted to centralize purchasing, restrict hardware purchases, or prevent "rogue" software purchases and installations that don't fit in with the master plan.
Even the best and most carefully laid plans quickly fall out of step in a fast-moving industry, however. More often than not, chaos has been the norm.
Mergers, for example, have a way of saddling IT managers with millions of dollars of hardware and software that is incompatible with their original operating environments. Data storage or processing requirements also may change overnight, thanks to new federal and state regulations that are constantly being churned out.
Furthermore, new technologies are constantly being rolled out, turning today's hot new systems into antiquated legacy systems. Or, conversely, countless and expensive new system implementations have not lived up to vendor hype, and companies have had to roll back their processing to the venerable mainframe.
Plans Get Shelved
With each new change or implementation issue, any attempt to centralized strategic planning goes out the window.
"Eventually, the enterprise architecture ends up on a shelf with no one using it," comments Srinivas Koushik, vice president and chief technology officer for Nationwide Financial Services. The problem, Koushik believes, is that centralized strategic plans have attempted to lock in place the technologies that existed at the time, without leaving room for changes in the industry, regulatory environment and technology.
For example, just five years ago, nobody heard of Web services, and mobile devices were still a novelty. A rigid architecture plan designed at that time would be woefully obsolete today.
"There's a fundamental flaw in how architectures at the enterprise level are built," Koushik says. "Organizations build static environments, overdo it with process and governance, then don't respond fast enough to change."
In the past 18 months, Koushik has been spearheading an effort at Nationwide-dubbed "adaptive enterprise architecture"-to develop a centralized approach to strategic IT planning. This innovative IT strategy is designed to quickly adapt to changes coming from the business as well as new technologies.
"We had every different flavor of architecture supporting our business systems," Koushik relates.
"The challenge has been to "put into place an architecture that will stabilize our current environment, bring it up to world-class standards, but at the same time, keep adapting to changes," he says.
The insurance giant set out to achieve this adaptive architecture by tightening up its front-end procurement process for IT products, Koushik explains.
"We're trying to get a significant level of standardization across the board. We're putting 'building codes' in place." To oversee this process, Nationwide assembled two technology committees made up of technical executives from across the enterprise-an architecture review board and technical standards board.
The architecture review board reviews proposals for new types of technologies and plans future IT strategies. The board is made up of the chief architects and the CTOs of the individual business units and affiliates, and works to collaboratively define Nationwide's ongoing IT vision and architecture.
The technology standards board reviews IT product acquisition requests from employees and compares these proposals to the architecture board's road-map. The tech standards board includes representatives from all of Nationwide's business units, and is linked with the carrier's overall systems management and procurement networks.
"When the architecture review board goes through and picks a specific technology and approach to build solutions, the technology standards board has to evaluate it in terms of security and costs," says Koushik. "No one in the enterprise can procure a product without it having the technology standards board's approval."
All technology purchases exceeding $300 must pass muster with the technology standards board, Koushik explains. Nationwide's procurement system is now engineered to flag non-standard purchases. These are then reviewed by the tech standards board. For new product releases, the board will grant a "research exemption" to test the product for a 60-day period.
One initial area in which Nationwide applied its adaptive enterprise architecture is with its Web servers and e-commerce systems.
"One of the things that we did right at the start of this program was to establish a reference architecture for Web-based applications," Koushik says. "Key projects-on which we're spending millions of dollars-are now all being built to the same specification, which translates into a common server and common security template. For example, we originally were working with five different Java application servers. Now, we have one."
In addition to reducing costs, Nationwide's Web server and e-commerce sites are performing better, he says. "The standardization we have achieved is helping reduce development costs and the variability in our production environment. As a result, we were able to increase the availability of our customer-facing Web systems to about 99.5%."
Nationwide benefits from its adaptive enterprise architecture program in three ways, Koushik relates. First, the process provides internal efficiencies and cost savings.
"We're trying to improve our total cost of ownership profile," he states. "We want to be able to get to a space where our development costs, maintenance costs and software acquisition costs are managed and controlled." The process encourages purchases by multiple business units from vendors, thereby providing for greater discounts.
Second, by streamlining the development and implementation process, Nationwide will be able to get new products and services out to the marketplace much faster, Koushik says.
"Whether it's in the financial service space or retirement systems area, or in our P&C insurance business, we want to be able to implement innovative business solutions that are enabled by technology," he states.
Finally, such standardization makes it easier to shift technology strategies in light of changes in the marketplace or regulatory environment.
Outside the Box
Nationwide's approach will go a long way toward addressing the complexity of managing a multi-million-dollar IT operation. However, effectively managing enterprise systems architecture involves more than a standards and governance process, cautions Dr. Leon Kappelman, director of the Information Systems Research Center at the University of North Texas, Denton, Texas.
An effective enterprise system architecture needs to do more than ensure that the IT segment of the business is running smoothly-it needs to fit in with the goals of the business.
"Certainly, a good standards process and good governance are part of the solution," Kappelman says. "If they're trying to reduce complexity, then they're on the right track. But architecture is more than that.
"You need to reach outside of the IT department," he continues. "Ultimately, it's about the people and how they do things. The things that look like the worse processes can be great if the people communicate well and really work well together. However, if you do them in isolation to the rest of the business, then all you're doing is optimizing subsystems and not doing anything for the whole."
Such interaction is vital to the success of an enterprise architecture approach, says Jamie Bisker, research director for TowerGroup, Needham, Mass.
"There needs to be connection, or liaison between the business units, and technology," he says. "IT needs to be more aware of what has to happen to make the business successful, and business has to know what the reality of the world is in an IT sense. That's where some of these adaptive architectures come in. A business may need a project in one month, but IT may not be able to deliver it for six months. Both sides need to understand the differences between timeframes, capabilities, and infrastructures."
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