Insurance industry CIOs know that modernizing and consolidating legacy applications is a key strategy for streamlining channels and improving efficiency. According to the latest Forrester Research "State of Enterprise Software: 2009" survey of more than 2,200 IT professionals, modernization is the No. 1 priority across many industries. But with more than 68% of all software projects failing to deliver, according to the latest 2009 Standish Group CHAOS Report, how can insurance industry IT leaders make sure these projects come in on time, on budget and with all the features needed by employees, brokers and customers?
The case for modernization is clear. At least 80% of most IT budgets are dedicated to just "keeping the lights on." This "IT dial tone" has been a perennial problem as CIOs try to innovate, but in a recession this maintenance cost can act like a boat anchor that forces very unpleasant trade-offs.
Most IT organizations have wrung as much cost as they can from hardware and data center consolidation. So where is the next big opportunity to dramatically reduce? The answer is application modernization, which often means consolidation as well.
In the last 20 years businesses have grown in silos, with associated disconnected business systems. The decentralization of IT resources, along with a view of IT purely as a service organization, has led to gigantic application portfolios and reliance on legacy mainframe systems; the maintenance of which soak up the majority of IT budgets at many businesses.
In times of plenty, the business ruled the roost and suggestions to modernize and consolidate application portfolios were invariably shot down. But in a recession, there is good news; IT leaders and business are finally working in a collaborative partnership toward a common goal: modernizing the business and driving efficiency - quickly.
ENGAGING STAKEHOLDERS
But how do IT organizations drive a successful outcome to these projects?
The first challenge is to identify candidates for modernization and consolidation. Look across business silos for redundant internal systems and conduct an analysis to determine overlap in functionality. Most unique business systems, such as CRM applications, accounting systems and agent portals, have significant overlap. You must research the overlap to be able to show the business, in detail, what functions are redundant. More importantly, articulate the business benefits to consolidate systems; what will be the measurable gains in efficiency or reduced cost?
Most IT organizations start the project with paper specifications and static screen shots. This reliance on paper puts any modernization project at risk for failure. Paper is for napkins, not complex software specs.
The most successful modernization projects leverage the power of visualization to give the business stakeholders a way to see and interact with the proposed end state. For example, if you are rationalizing 12 CRM systems down to a single instance, consider forming a cross-functional requirements team that includes business participants. Use rapid, iterative definition techniques, such as JAD or JAM sessions, to speed up the process of consensus. Instead of stakeholder review meetings (wasting time flipping through giant paper specifications that no one can understand), have your stakeholders interact with a working preview of the reference application. You will obtain better feedback faster. And you can share the visualization globally, involving more stakeholders in the collaboration.
This visualization technique can be used to test reactions directly from end users. It's amazing what happens when previously resistant users actually touch and experience the proposed system. They get excited and are willing to participate in the process of collaboration and consensus.
Completed visualizations can be also used as an exact guide by outsourced development teams. Working simulations cut confusion for development teams and virtually eliminate rework, which speeds up the delivery of the final system. And you're not paying for change orders, further enhancing IT's reputation for delivery.
Successful modernization efforts deliver big results, and in some cases, money saved needs to be given back to the bottom line. But forward thinking organizations are using this opportunity to convert maintenance dollars into innovation opportunities. If a CIO can cut the maintenance budget by 30% to 40%, why not take those savings and invest in new initiatives that drive further efficiency or position the company for growth when the recession finally eases? Sounds like a smart strategy to me.
Maurice Martin is president, COO and founder of iRise, El Segundo, Calif.
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