Chris McMahon

The ability to measure the business value of IT can help insurer CIOs avoid one-sided cost-benefit analyses and a misalignment between IT and the business, which can impede effective operations, according to “Value Metrics and Business/IT Alignment,” a report from Novarica, an insurance business and technology consulting company.

Business value metrics, a widespread and critical business/IT alignment tool, can help insurer CIOs demonstrate the direct impact of IT spending and investments on the business. And, more than 90 percent of insurer CIOs said they use at least one business value metric consistently. “Tracking more business value metrics is correlated with higher levels of business/IT alignment,” Novarica said.

Novarica found that two-thirds of insurer CIOs consistently use financial or business performance value metrics and that slightly less than half use user feedback surveys consistently. A third consistently use hard-dollar ROI as a value metric, possibly due to the difficulty of collecting accepted business performance data for ROI calculations, Novarica said.

Insurer CIOs who report high levels of business/IT alignment use 20-percent more value metrics on average, Novarica said, and “high-alignment CIOs” use an average of 3.7 value metrics consistently, compared with only 3.0 for “low-alignment CIOs.” And, improving the alignment between business and IT is a continuing area of focus. “Insurer CIOs are optimizing organizational structures and processes while increasing communication and stakeholder education efforts in order to improve business/IT alignment,” Novarica said.

In addition to improving their governance committees and establishing steering committees, Novarica said insurers have improved business/IT alignment by creating joint ownership of projects and portfolio management; creating cross-departmental teams; doing joint strategic planning exercises; separating PMO and business analysts from IT and business to serve as a neutral facilitator; and moving IT staffers into business units to drive testing and requirements gathering.

“Value Metrics and Business/IT Alignment” is based on poll of 95 members of the Novarica Insurance Technology Research Council, a community of insurer CIOs and senior IT executives. Participants included 10 large and nine midsize life/annuity insurers, and 21 large and 55 midsize P&C insurers. Large insurers are those with more than $1 billion in annual premiums. Companies represented multiple lines of business and products.

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