Like many industries, insurance is examining its systems and processes to make certain they will contribute toward achieving a more successful and profitable year in 2004. Celent Communications views this activity as the major technology direction for carriers in the months ahead. A lot of focus will be on internal applications and improving the infrastructuremaking applications work well with each otherand focusing a lot of the IT spending around improving internal operations, says Matt Josefowicz, manager of the insurance group for Celent and one of the authors of Insurance Outlook and Strategic Agenda: 2004 and Beyond.
Josefowicz advises insurers should attain an AAAA rating for their IT departmentsalignment, agility, accessibility, and affordability. Those basically are the four things IT planners should keep foremost in mind, he maintains.
Alignment: We see the business/IT alignment as a huge, overwhelming concern these days, says Josefowicz. The number-one concern of program offices and IT steering committees is making sure the scarce IT resource dollars are being directed at the most effective projects. These projects must support the general business strategy, he believes, rather than being done in a disconnected fashion that may not get the biggest benefit for the company from its investment. We see CEOs and CFOs taking a more active role in steering committees as business/IT alignment really is job one, he says. Even more than cost containment.
Agility: Insurers need the ability to react to changing business conditions, and they need systems and infrastructure that can be adapted to those changes. You need to make sure the systems are going to be able to support the introduction of new products, new channels, or new business practices, says Josefowicz. There are a lot of cases where the adoption of better business practicesbetter workflow, for examplewere held up because the old workflow was hard coded into some legacy environment.
Accessibility: Insurers must make it possible for every appropriate party to do business with them, according to Josefowicz. You have to make sure the systems have the right interfaces and the right capabilities to be accessed by stakeholders both inside and outside the enterprise, he says.
Affordability: There shouldnt be much debate about this point, asserts Josefowicz. You have to make sure the total cost of ownership is considered, not just the software, the hardware, and the maintenance, he says, but [also] the internal maintenance and the non-IT resources that are going to be devoted to both planning and implementing as well as maintenance going forward. He adds insurers need to be certain there is a real sense of what a system is going to cost to install and maintain and make sure it fits budgets that arent necessarily shrinking but are under increasing pressure.
An ongoing area of concern for carriers in 2004 is legacy systems. Some forward-looking companies will be replacing their legacy systems this year, he believes, but most will make changes on a component-by-component basis. Thats one of the main reasons Web services is so hot now for systems integration. Companies are wrapping their legacy systems with a Web services layer to help integrate into other kinds of environments, says Josefowicz.
Insurers should recognize there is no single right answer for what they should do with their infrastructures. Everything is situation specific, says Josefowicz. There are some solutions that may not be good solutions for one company, but they may fit another companys business situation perfectly.
Robert Regis Hyle
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