Miami — While many insurance technologists no doubt bristle at the notion that IT is somehow separate from the business, it would be a stretch to assert that technological concerns have historically been paramount when overall corporate strategy is formulated at insurance companies.

At a panel discussion at held at Innovation World 2008 in Miami, the question of how to bridge the traditional chasm between IT and the business was discussed. 

This discussion seems especially timely, as role of IT seems to be in flux. Traditionally, IT has been viewed by many as a cost center tasked with enabling and executing business strategy.

Insurance carriers often spend 3% of premium on IT, noted panel member Mark Cressey, VP & CIO of Boston-based Liberty Mutual Group. While any other part of the enterprise with such large expenditures, would be subject to intense scrutiny, the complexity of IT has shielded it from closer inspection.

“For a long time IT was a “black box,” Cressey said.

Yet, those days are ending as the prolonged soft market and the financial services meltdown restrict budgets. Additionally, the emergence of cloud computing and Software-as-a-Service have chipped away at IT’s historic value proposition.

Accordingly, Cressey said an essential problem was overcoming the “black box” mentality to ensure that IT’s value proposition is brought into focus. “We must have the business leaders feel as though they have their hands on the levers of IT as much as they would with finance or any core business operation,” Cressey said. “That’s the breakthrough we need.”

For IT to assume an expanded, more strategic role, a thorough understanding of the business, and an engagement of upper management are the “table stakes,” Cressey said. “If you’re not engaged at a C-level, you don’t have the credibility to sit at the table and make recommendations when it comes to strategy,” he said. 

IT also should make sure its house is well in order before pushing to move beyond implementation, and assume a more strategic role. “If you are not on time and on budget [elsewhere], don’t try to sell a new BPM initiative to the business—they are not going to buy it,” Cressey said.

Yet, Cressey stressed that the process of aligning business with IT is a two-way street. One fortunate development for technologists is that people on the business side are become more conversant in the language of technology.

“Business must take business strategy down to a level where it is actionable by IT,” he said.

In addition to speaking a common language, Cressey felt ensuring that both sides of the house are using the same key performance indicators also is essential. Insurance technologists cannot content themselves with meeting technical goals while ignoring what the effect on the business will be as a result of a given initiative. For example, while page load time is a useful, technical metric, it does not represent the totality of user experience on an insurers’ Web site.

However, the complex, opaque nature of IT means that certain functions, such as moving from one technology to the next, and keeping systems current, will always belie common business metrics. “We do work that is hard to measure,” Cressey said.

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