Should business and it alignment be a strategic initiative across the enterprise or can it be treated on a case-by-case basis within an organization?That question is the subject of some discussion as insurance companies begin implementing their 2006 IT plan. For carriers, the answer lies within the industry's unique approach to doing business, emphasizes Tushar Hazra, Ph.D., senior consultant with Cutter Consortium, an Arlington, Mass., IT consultancy.
Dr. Hazra's says his experience with one of the nation's leading carriers is representative of the tendency many carriers have to use mainframes and other disparate systems (sometimes disconnected) for the storage of information.
"Many insurance companies also still use manual processes to access and manipulate information. For example, underwriting and claim processing systems don't necessarily use the same data repository for their information processing," he says.
Accordingly, aligning IT strategies with business goals often is a combination of strategic and tactical initiatives.
"Strategic initiatives are top-down, where the senior leadership of a company formulates a set of principles that is incorporated in the culture of the enterprise and is adopted by the individual business function areas and the associated IT organizations," says Dr. Hazra.
"On the other hand, tactical alignment is bottom-up, where visionary leaders at the organizational levels of a company practice and implement the alignments and gather lessons learned, which then get shared across the entire enterprise. Subsequently, the lessons learned drive the principles for the entire enterprise."
Dr. Hazra believes that in either case, it starts with a set of ground rules, and to be successful, individual stakeholders at all levels of the insurance organization must participate actively in setting them.
For many insurance companies, the process of setting the relevant ground rules at an appropriate level of operations determines whether they must be considered as a part of strategic or tactical objectives.
The Nature Of The Business
Before setting ground rules, notes Dr. Hazra, the transactional nature of the insurance industry must be considered along with the current infrastructure and architecture of the company at the enterprise level.
Other considerations are: the transaction volume of the company, the need to manage the consistency of the data transfer, and specific needs of the underwriters, agencies, adjusters, and policy holders to determine whether the alignment has to be strategic or tactical.
"Strategic alignments to deal with the transactional nature include tactical alignments to handle specific user needs," claims Dr. Hazra. "Adding business process transformation to the mix will make tactical approach more effective. On the other hand, transitioning from mainframes to a service-oriented architecture will make strategic approach more useful," he adds.
"If these ground rules are set right from the beginning and practitioners follow them accordingly, it will result in delivering business value."
Setting appropriate ground rules also depends on the level of resource utilization, organizational readiness or awareness, and the ability of a company to utilize the right set of technology and tools, Dr. Hazra claims.
"Over the past few years, business and IT organizations in many insurance companies have worked closely to collaborate and share responsibilities and accountabilities to deliver business value," Dr. Hazra points out.
"This trend assures us that collaboration is a primary key to the 'organizational readiness' for insurance companies in their alignment endeavor."
As a result, to establish an effective method for getting an (insurance-based) organization to establish ground rules, the IT team should adhere to the following steps:
* Identify the critical business needs and prioritize them;
* Involve associated business units to taking the ownership of the alignment initiatives (make them sponsors);
* Create a set of metrics that can help measure the progress of alignments (establish finite deliverables, milestones, and goals);
* Measure, monitor, and manage expectations of business and IT alike;
* Develop risk mitigation plans, and execute the plans to maintain alignments;
* Collaborate continuously to keep business units engaged at all times.
"These steps may not have equal importance for every company," Dr. Hazra cautions. "The volume and complexities of the transactions of an insurance company will influence the scope of the above-mentioned activities. And practitioners may have to adjust the significance of each step according to their business objectives or goals."
By building and managing ground rules with incremental improvements, i.e., taking a "lessons learned" approach, both strategic and tactical alignments can be realized.
"This provides a more consistent way of managing relationships between business and IT organizations," Dr. Hazra suggests, "and allows both organizations to establish confidence in each other's level of commitment."
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