Everybody likes to talk about the weather, but nobody wants to do anything about it.The same axiom could be applied to U.S. insurers' approach to customer service. Most insurers will declare that customers represent the lifeblood of their business, but what are they doing about it? The proliferation of siloed databases across organizations-compounded by multiple systems and processes-inhibits insurers' ability to quickly identify cross-sell and up-sell opportunities and provide quality customer service.
Insurers are addressing their failure to achieve a seamless IT fluidity across the enterprise. With enterprise application integration (EAI), insurers are able to integrate business applications across their enterprise more quickly and effectively. And, Web services, programmatic interfaces and scripting languages support improved data flow.
Moreover, the integration of new, modified enterprise applications into existing environments enables insurers to maintain the value of their long-term legacy system investments.
"Insurers have to break down their internal boundaries to establish joint services," says David Hollander, managing partner, financial services solution group-insurance, for Bermuda-based Accenture. "System replacement decisions factor into this: Keeping legacy systems intact for the short term, through the use of middleware, is where EAI is placed squarely in the middle."
As best-practices enterprise application integration continues to evolve, Hollander says, integration will remain a challenge. "The so-called pipes and plumbing are in good working condition for most insurer systems. The biggest problem is aligning these systems. In the end, insurers will be motivated to break down these internal boundaries with one end in mind-that the customer is king."
Industry observers say the desire to achieve enterprise integration has been pent up for some time.
"For a long time, the belief was that a legacy system could be rebuilt into some 'magical' system that could automatically create relational databases," explains says Jan Sibley, vice president for ThoughtWorks Inc., a Chicago-based IT professional services firm that provides application development and systems integration services.
"Insurers have readjusted their priorities to think seriously about a service-oriented architecture (SOA)," notes Sibley, a former chief information officer for Washington Mutual.
"A big part of SOA is identifying IT components that can be reusable; reusable components built within a distributed platform can unlock legacy data without having to replace a legacy system," Sibley continues.
"Through legacy wrapping, for instance, a carrier can chip away at the data housed in the system while moving toward a service-oriented architecture."
Indeed, experts say insurers must develop some semblance of agility to have a service-driven infrastructure come to fruition.
Sibley is a proponent of a concept that's known as "agile development and enablement," which fundamentally changes the way business and IT departments approach software delivery. "Agile development is a set of logical business and IT practices used to develop software based on the ability to build tools that automate testing and foster continuous integration of shared code," Sibley explains.
With the objective to develop high-quality software, an IT unit that operates within the principles of agile development would conduct "unit tests" of a particular business or functional unit within the organization.
"We break unit tests down into what we call 'stories.' We place stories (which encapsulate the dynamics of a particular business unit) in rank order, which helps determine what is most important to that business," states Sibley. "More than that, unit tests and stories determine what the complexities are within the business. Agile development makes certain a company is addressing the most crucial elements first."
Being agile is not an easy task when considering the amount of red tape and bureaucratic hoops that insurers have to be overcome.
Sibley offers this advice: "With larger organizations, it's important to start with a loose framework and grow the integration program incrementally. Start by establishing a reference architecture framework with built-in components where data and processes are grouped in more logical ways."
To that end, corporate and IT governance structures can help insurers establish a wide-angle vision of the consolidated enterprise and ultimately help pinpoint IT priorities and identify shared services opportunities.
"One emerging concept is what's know as a three-dimensional visual enterprise solution," explains Susan Cournoyer, senior research analyst, insurance, for Stamford, Conn.-based research and consulting firm Gartner Inc. "It's a concept that says, 'Here is a vision of how all these pieces or parts fit together across the enterprise.' A company identifies things that are common across many silos and then condenses them down to one kernel or component to serve multiple parts of their IT framework."
In 2003, Allstate Insurance Co. embarked on a mission to promote cross-functional leveraging of resources, establish strategic synergies and participate in IT-related shared-service opportunities.
Business of technology
"We wanted to execute long-term strategies in a manner where we could simplify our environment and rejuvenate our people skills-the right people, right place and right costs all being the focal points," explains Anthony Abbattista, vice president enterprise technology strategy and planning for Northbrook, Ill.-based Allstate.
Recognizing the need to streamline and better leverage its IT capabilities, Allstate's top brass created the position of enterprise technology strategy and planning, and tapped Abbattista to assume the post.
An operational behemoth, Allstate is structured within three core business hierarchies: property/casualty insurance, financial services and investments. Each business is led by a dedicated CIO, with all three CIOs reporting to their respective business-unit presidents. Abbattista, meanwhile, reports directly to Allstate's senior vice president and chief technology officer, Cathy Brune.
Overseeing about 1,000 full-time employees, Abbattista's group delivers data warehouse and business intelligence services; an enterprise application group; enterprise architecture group; and enterprise strategy and planning-all of which assume a unique role in tracking, monitoring, measuring and responding to e-business needs of Allstate's core business areas.
Allstate's business and IT leaders, Abbattista says, have formed a true partnership that is dedicated to providing world-class customer service capabilities that not only spur customer retention but serve as a vehicle for recruiting new blood.
"We always talk about the business of technology and the ability to enhance speed-to-market for our business partners who want (information) faster than ever before," he explains.
The establishment of an IT-driven, shared-services strategy is not done by way of smoke and mirrors. Rather, Allstate-similar to many of its peers that have embraced service-oriented architectures-builds a consensus from a divergent group of IT and business executives.
One of the goals: Determine which IT applications would be most conducive to sharing across the company.
"I'm charged with determining what components we would be inclined to select on a shared basis," Abbattista says. "We always set out to create some level of tension to balance the needs of the business units. They developed my position to create this tension and figure out where and when to share.
"We spend a lot of time making sure we have common messages established. Our charter is to think through these issues. We have been successful to share resources across the organization, but it's a constant negotiation process to make it work," he says.
The legacy challenge
But even the most ambitious companies find the task near impossible if siloed information is preventing seamless transparency. To that end, the incompatibility between the various mainframe systems has to be taken into account, industry experts say.
"If you've been in business for 20 years, you probably have data in servers and databases located all over the place," says David West, who leads insurance industry strategies for SAS, Cary, N.C.
"One of our clients uses middleware to access data from multiple legacy systems. The client is not prepared to convert to a modern database, so they use middleware to access the data from the mainframe."
Allstate's IT enterprise is supported by either JAVA or .NET operating frameworks, reinforcing the notion that Abbattista is a proponent of flexibility-married to a philosophy that "one operating platform might not be enough, three might be too many, while two might be most advantageous."
But even two distinct platforms can beget a silo mentality. "We have been able to modularize older applications through XML middleware," says Abbattista. "We might have a 20-year-old legacy system, so we get to the point where we have to make a decision about whether to rewrite the system or identify a way to use Web services to repackage the data stored in that system.
"There's definitely value in legacy systems," he continues. "The question is: 'Can we harvest what's held in these systems? Can we extend the life cycle?' There is some wisdom in that because the legacy system is a core competitive differentiator that defines every insurance carrier."
All things considered, what is holding back enterprise technologies? For starters, there's insurers' approach to implementing software applications.
"In the last eight to 10 years, there has been a huge focus on niche applications and product line applications, but these applications were all held in separate silos," says Gartner's Cournoyer.
"Now EAI is being put in place to draw from all these disparate applications. There had been very little investment in EAI. Last year, however, many insurers were busy developing the EAI layer equipped with a relational database," she says.
Integration issues between business and IT--a condition that impairs an insurer's ability to get an enterprise view in place--is also to blame. "Complex systems are one thing, but people and cultural issues are another. Businesses are inclined to protect their turf and their data," Cournoyer says.
"Enterprise application integration has to begin with an end in mind," says Accenture's Hollander. "From a technical standpoint, senior leadership has to establish a vision: Do you need one common platform connecting all the businesses, or do you take one business at a time to establish that one common platform? It's also a case of asking how do you separate commercial lines from personal lines. How can you create a picture of both when they both run off different definitions and forms?"
Carriers are searching for advice on how to align business and IT. Mike Gruia, president of New York, N.Y.-based UMT, a provider of portfolio management software solutions, reveals that a Webcast sponsored by the company in January attracted insurance companies such as Allstate, AIG and Countrywide, among others, to participate.
A real-time poll conducted during the Webcast revealed that 49% of participants believed there were "alignment issues" between business and IT. On top of that, UMT discovered that business units still harbor a "low trust" for their IT units in supporting their strategies.
To compound the situation, there appears to be limited involvement of senior management in crafting a discretionary IT spending budget, says Gruia.
Part of the problem is that silos exist to the point where establishing such a budget-one that could be modified depending on need-is impossible because of the existence of silos across a particular company, Gruia explains.
"Even in cases where companies might have a steering committee in place, the committee can't function properly because in the end it's a very subjective process that's undermined by poor analytics-all which make it hard to get a handle on a company's enterprisewide strategies."
What's in your portfolio?
Insurers that have portfolio management software are able to prioritize which business drivers spread across their vast enterprise are prime for additional funding requirements and which drivers might have to be scaled back from a capital investment standpoint.
The solution is able to look at multiple businesses across the enterprise, plugging in a number of internal variables that drive the analytics. Business drivers at most companies range on a scale from those that enhance revenue to those that foster cost-savings. In the ebb and flow of corporate decision-making, priorities are apt to change on a quarterly or even bi-annually basis-if not more frequently.
With operating silos in place, it's difficult for insurers, especially larger ones, to obtain an enterprise view and to visualize how its businesses all work in conjunction with one another--not just in isolation.
AXA Financial Services, N.Y., began using a portfolio management software solution designed by New York-based UMT to assess what the most effective business drivers were across its organization. At AXA, these drivers increased following a 2004 merger with The MONY Group, a deal that heaped more systems and processes into the equation.
Mike Gruia, president of UMT, says the solution is helping AXA get a better handle on ways to assess and audit its business strategies. The UMT software manages four distinct functions: building, optimizing, planning and managing a business portfolio. Each of these phases sits across a central repository as part of enterprise application integration, Gruia explains.
For instance, the creation (or building) phase of managing a portfolio is supported by UMT's Portfolio Builder, which is designed as a single data-entry point to capture what AXA might need to know about each proposed project, from investment cost and benefits, to scope, dependencies, risk and alignment, to strategic objectives, which can then be used to generate business cases.
In the selection (or optimizing) phase, AXA can align its project portfolio with its business strategy and optimize its portfolio against multiple constraints, including cost and resource. In the planning stage, AXA can balance and align resource utilization with business demands, while enabling the flexibility to create multiple scheduling and resource capacity scenarios, states Gruia.
In the management phase, UMT's Portfolio Dashboard provides information on the status of project portfolios so that AXA can make timely, fact-based decisions that optimize their company's performance, he states.
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