When John Golden took control of IT at CNA Financial Corp. in late 2001, he faced the same challenges many CIOs are still grappling with: How do you transform diverse legacy systems into a modern platform that enables faster product development, better customer service, higher productivity and greater operational efficiency?After consolidating 20 IT groups into one, and focusing on the business value and total cost of ownership of IT systems and applications, Golden, in only a few years, has reduced the Chicago-based carrier's nondiscretionary IT expenses from $400 million per year to $200 million.
What's more, Golden's IT team now spends 37% of its time on maintenance of applications and 63% on new project development-a complete flip-flop from how it divided its time in 2001.
Under Golden's sponsorship, the company also has eliminated 17% of its applications; moved to a service-oriented, enterprise architecture; developed a data warehouse and business intelligence tool called Merlin; implemented a common desktop infrastructure and a common customer database; and overhauled its claims platform to reduce claims leakage and improve adjuster productivity (see "CNA Lays A New Claims Foundation," January).
Current initiatives include new platforms for underwriting, billing and collections, financial reporting, and enterprisewide security.
An honest assessment
"When we started down this path in late 2001, we clearly had a portfolio of applications that were not what we needed them to be," says the executive vice president and CIO at CNA Financial Corp.
That dilemma became even clearer when the company completed a six-month assessment of its applications and technologies-an exercise initiated by Golden shortly after taking the CIO post.
With the help of IBM Corp. and two small consulting firms, which Golden declines to name, CNA conducted an application rationalization study. The study confirmed his suspicions. The company could not invest in technology for the future while continuing to maintain many of the systems that were draining IT resources.
"We knew we needed to make a substantial investment in our operation platforms to improve underwriting, claims, and billing and collections," he says. "And to make that investment without having some sort of roadmap would have been reckless."
A lot of folklore permeates many insurers concerning the value of their systems, Golden says. Emotion rules, IT folks can get in "religious" debates about their technology preferences, and business managers who scream the loudest often get their way.
But that's not how it works in Golden's world. "At the end of the day, facts win," he says. "That's why it was important to do a logical, honest assessment of what we had, what was working and what wasn't working."
With that assessment completed, Golden had his roadmap-a living document that enables him to work with senior execs to align business needs with IT resources. "For each application, we were able to get (an appraisal) that tells us: Do we retire this application over time? Do we sunset it right now? Or do we invest in it down the road?" he says. With these decisions determined, Golden and the company's executives can make IT decisions for the future based on a solid analytical foundation.
For example, the company was maintaining some applications that had only one or two users. In billing and collections, not a single application out of about 60 was retained.
In these cases, it was easy for Golden to approach the business unit executive who owned that application to say, "I want to shut this application down." That's because he knew the actual risks associated with each one and its ongoing costs.
"When we started looking at these numbers and the potential we'd save by taking certain actions, it was staggering," the CIO says. With that information in hand, Golden sat down with the senior business leaders to understand their objectives and evaluate the business cases for various IT options. "This is how I work to align IT and business strategies," he says.
By focusing on the business value of IT decisions, including premium benefit, loss improvement, expense reduction, investment income and risk reduction, Golden and CNA's business leaders are able to co-commit to measurable goals. "Whatever we say we're going to cut is actually taken out of the budget," he says.
Golden also challenges his IT team to present three viable solutions for large IT projects. In many companies, a viable solution is one that simply meets the business unit's parameters. That is, it provides the desired functionality and is delivered on time and within budget, he says.
But again, that's not how it works in Golden's world. A viable solution to the CNA executive is one that not only meets scope, schedule and budget, but one that also improves total cost of ownership-which he defines as reducing nondiscretionary costs.
"Delivering on the project is only one aspect of success here," he says. "The ultimate measure of success is: Did you deliver the business value?"
- Name: John Golden
- Title: Executive vice president and CIO
- Company: CNA Financial Corp.
- Years: 3-1/2
- CNA Financial Corp.
- Headquarters: Chicago
- Net Premiums: $62.5 billion in (2004)
- Employees: 11,000
- Products: Commercial property/casualty lines, specialty lines
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