A study released in June by Giga Research, an operating unit of Cambridge, Mass.-based Forrester Research Inc., provides insights into specific spending areas that CIOs presently value.The study, "Improving Business and IT Efficiency," culled insights from 10 CIOs across the United States and Canada in the property-casualty, life/health and specialty insurance industries.
Perhaps to nobody's surprise, large-scale IT spending projects have taken a back seat, with spending priorities selectively centered in areas such as software, network equipment and salaries/benefits.
More specifically, spending is on the rise for security, content and document management and core transaction systems, followed by data warehousing, focused CRM projects, agent-related and claims-related software and business intelligence.
Spending on hardware and outsourced services is basically flat and spending on consulting is down. Giga found limited interest in portals, e-procurement, Internet e-commerce and outsourcing.
CIOs not involved with the study outlined their own internal IT spending blueprints-some of them reinforcing Giga's conclusions and other repudiating them.
For example, Jan Franklin, CIO for Los Angeles-based Farmers Insurance Group, is pushing new IT projects with a solid business case for improvements in efficiency or additional cost savings. Farmers' IT budget has been reduced 7%, across the board, with spending on hardware flat, and spending on outsourced services and consulting down. Top spending areas have been core transaction systems and infrastructure.
Investment in areas such as portal technology ranks as a priority for companies such as Farmers because "our industry is one that continuously develops and improves our customers' Web-based access-both internally for our business units, for agents and for policy holders," Franklin says.
Although the budget for outsourcing is lower at Farmers, the insurer still regards outsourcing as a tactical and strategic deployment. "We will save $6 million in 2003 by outsourcing (implemented in past fiscal years), and we continue to look at viable options for outsourcing where the business case warrants it," says Franklin.
Rory Read, vice president of information technology for Columbia, Mo.-based property casualty insurer Columbia Insurance Group, says Columbia Insurance's IT budget grew in the double digit range over last year.
"Both software and hardware expenses are on the rise and even consulting is up from last year, but that's because the investment there was so low to begin with," says Read. "We beefed up security markedly, both systems and procedures, and placed a priority on virus protection software. We probably increased our budget for security and privacy about 50%."
