o The nature of SOA initiatives.

o Challenges with SOA initiatives.

o Purchasing patterns of external SOA services.

Our Web survey of L&H and P&C insurers ran from Jan. 7 through Feb. 6, 2009. Somewhat less than half of the insurers (40 percent) had 2008 net written premiums (NWP) less than $250 million, while a third had NWP of $1 billion or more. Of the almost three dozen insurers that stated they were involved with SOA, nearly half (46 percent) said their SOA initiatives already were in production, while the remainder had SOA initiatives in a pilot stage (24 percent) or planned to invest in the next two years (30 percent). The SOA initiatives in production range from being new (31 percent first implemented in 2007) to older (30 percent first implemented in 2001 or before).

Insurers clearly understand what is happening around them. Almost 60 percent chose as their top reason for adopting SOA the need to support an ever-changing business environment to become more agile. Close behind (55 percent) as their number-two reason for adopting SOA was the need to enhance their internal operational process efficiency and flexibility. The two options that were chosen least often by the insurers for adopting SOA were upgrading the company's infrastructure (21 percent) and revenue growth (10 percent). Agility is in and infrastructure changes are out are now the rationale for SOA.

We asked the insurance respondents which business departments have had involvement with SOA initiatives. From a list where they could select as many as they wanted, underwriting (73 percent) and policy administration (58 percent) were the top choices. But given the need to keep customers satisfied–in a distressed environment or not–claims (42 percent) should have been closer to the other choices. Going forward, insurers have placed marketing and distribution at the top of their to-do list for their next SOA initiatives after hopefully implementing more claim SOA initiatives. (See Figure 1.)

Clearly, with SOA and its need to understand business processes as fully as possible, there must be deep and extensive collaboration between the business departments and IT. Clearly? We asked to what extent the percentage of SOA-related activities and decision-making are led by IT vs. one or more of the business units. Almost two thirds of the respondents said the activities were 100 percent led by IT.

We asked to what extent business units have been actively involved in the responding insurer's SOA initiatives. Half said IT collaborated with the business users a moderate amount. A quarter of the respondents said IT collaborated with their business users a great deal. Of course, the other 25 percent of respondents said the collaboration was only minimal.

But SOA is more than architecture. SOA also is about understanding business processes to better decide what functionality needs to be exposed as services–and at what granularity. We asked the respondents how detailed an analysis they performed on the business processes that were the focus of their SOA projects. About a third said detailed, but half said only somewhat detailed.

With the lack of business involvement and the seeming lack of detailed process analysis, it isn't surprising respondents said only 10 percent of the implemented SOA initiatives have exceeded expectations. What is surprising is 55 percent of the respondents said their SOA initiatives have met expectations. We wondered whose expectations–IT or the business–were met. But we didn't have to wonder for long. When asked whether their organization already had derived business benefits from their SOA projects, half of the respondents chose the "duck-and-cover" response of neutral. Most of the other half of the respondents agreed or strongly agreed. That said, who took the survey? Only six percent of the respondents said they were from the business, while the overwhelming rest of the respondents were from IT.

We asked the insurers what challenges they have encountered. Given the lack of business involvement, it definitely shouldn't be shocking the one challenge chosen most frequently (respondents could select all that apply) was resistance to change. The skills shortage shown on the graph above refers to the shortage of IT skills required to support SOA initiatives. The lack of business understanding refers to business not knowing what SOA is about either generally or the specific benefits this can provide to the company. (See Figure 2.)

But insurers answering the survey have gotten executive sponsorship. This challenge (not shown on the graph) was chosen last among the list of 12 challenges provided in this question. How can insurance companies provide executive sponsorship without expecting significant business involvement, including in the analysis of the functional processes to be taken apart for the SOA deployment?

Are these insurers purchasing external services to help their firms deploy SOA? We asked the respondents about their company purchases of external services in 2008 and planned purchases in 2009. For 2008, selecting as many options as they wanted from a list of seven possibilities, IT and business consulting service providers were chosen almost 50 percent of the time. Not far behind, and unfortunately not surprising, as the second choice (40 percent), these insurers said they did not purchase external services. The third choice (36 percent) of these insurers was purchasing training or education services.

The 2009 plans clearly demonstrated a shift in purchasing external services. IT and business consulting services still topped the list (48 percent). However, training and education services moved up to the second position (36 percent). While the position of not purchasing external services slipped to third place (32 percent), the insurers also stated plans to purchase custom application development services (32 percent) as a tie for third. It's interesting what more experience with SOA deployment yields.

The survey results highlighted both good and bad news. The good news is insurers are deploying SOA, particularly for underwriting and policy administration. It also is good news insurers are realizing they need help with their SOA deployments because they have determined their companies do not have the requisite skills in-house. The bad news is glaringly negative. Insurers must get business significantly more involved in their adoption of SOA, specifically in upfront (and ongoing) collaboration and detailed process analysis. IT also must take on the responsibility of educating the businesses about SOA, including the benefits of deploying SOA and the reasons a successful deployment will take longer than management wants or expects.

In this era of financial distress, governments and regulators will become more involved in the business of insurance. Producers, policyholders, and prospects will continue to ratchet up their expectations. Insurers realize standing pat with their legacy systems won't be anywhere near enough to succeed. But they must significantly involve the business if they want to make the trip easier to that gleaming Emerald City of agility and flexibility.