Insurance Networking News - July/August 2011

MCINTYRE: Honestly, we have been doing more than just keeping up for the past few years. My business partners understand the positive impact that technology can have on business growth. Whether it is new products, new features, making it easier to do business with us or creating efficiencies, we have been focused on freeing up funds that in the past were focused on running the business and been able to refocus those funds on investing in the business growth.

ROY: We have a very close working relationship with our internal business unit customers. I, along with my IT leadership team, have continuous dialogue with the business teams to stay in sync with our businesses’ growth strategies, customer needs, and competitive dynamics. Since we have these regular discussions throughout the year, securing funding for new projects is not a difficult exercise. It becomes a joint decision between IT and the business because we can clearly draw a line from the project to financial impact for the company.

For example, we just launched our Smartphone Loan technology, which enables loan applicants who are credit union members to begin the loan application process from their smartphones. The technology is a mobile version of CUNA Mutual’s loanliner. com product, which is used by more than 500 credit unions nationwide. This is a clear example of technology and business remaining aligned to drive new market and customer growth long before this product was developed.

How has the process of setting an
IT budget changed over the past
five years?
The CIO and CFO:
A Long Way to Go?

CFOs tend tO have a lOw OpiniOn of the CiO and the entire it group. such is the sobering finding of a 2011 Gartner survey of 344 CFOs at north american companies, including insurance, financial services, health care, manufacturing and other fields.

The survey, conducted by
Gartner and Financial executives
international, an association for
CFOs and other financial executives,
the CFOs felt the it department
“delivers the technology innovation
needed by the business,” or that it
“has the right mix of skilled people
to meet business needs.” Finally,
only 18% of the CFOs said they
thought their it service levels “meet
or exceed business expectations.”
interestingly, the survey
revealed that 42% of it organiza-
tions now report directly to CFOs,
“and that is expected to increase,”
says Gartner analyst John van
decker.

insurance CiOs have other challenges: Those charged with creating enterprise-wide efficiencies will be more likely to find favor with the CFO if they are able to communicate the long-term benefits of initiatives that have yet to prove solid, long-term returns, such as cloud computing or virtualization. Further complicating matters is the CiO’s pitch for core systems replacement (versus modernization), in which several cost-benefit analyses are offered with few short-term results.

van drecker says that the study’s findings point to the need for the CiO and others in the it department to engage the CFO as often as possible, and communicate clearly why certain it investments are being advocated by the it department. Further, having the CiO engage on matters of business strategy can only help fuel further discussion on why investment in certain technologies will enable that strategy’s success. —Pat Speer

EDWARDSON: Historically, much of the process seems to have been focused on long-standing maintenance or service agreements. In recent years, our process has shifted to reevaluation of such agreements to determine need and value. Demonstrating this practice to the CFO and other key stakeholders, has helped facilitate a more flexible budgeting process. Now the discussion can truly focus on what will provide value versus justifying a need.

FOERST: Changes to the process have varied by IT budget category. Establishing our target for non-dis-cretionary line items hasn’t changed much. The expectation that we’ll pursue alternatives that make this spend as cost effective as possible may be heightened to a degree, but it has always been our role.

Where we’ve seen the most change is in the
area of discretionary investments. The discipline
around the selection and justification of projects has
increased. Projects must fit into the strategic plan
and prove themselves through a business case model
that looks at the cash flow over the projected lifetime
of the asset. Justifying projects isn’t new for us, but
the rigor exercised around this effort has increased.
There are many competing forces for investment dol-
lars, and we need to maximize our long-term return.

MCINTYRE: There is more focus and transparency during the process at senior executive levels. There is a process in which the business strategy is aligned to the projects and reviewed closely. It isn’t automatically “flat;” it might end up being flat, but there are many discussions before that final IT budget is determined.

ROY: We have changed the budget process for IT from a reactive state to a more proactive planning process with our business lines. We set a target for IT infrastructure and security and vet this with our executive team for top-down decision making.

For projects, we partner with our internal cus-
tomers and have regular discussions about business
strategy, product development and new market
planning. These discussions focus on the business
need that we, in turn, can translate into how IT
can support these plans. These proposals are then
presented to a new committee we formed several
years ago called the Business Investment Council
(BIC). BIC oversees funding for all large projects
in the company and includes myself, our CFO, our
chief product officer, head of operations and head
of marketing.

What are some of the keys to business
and IT working together to set the IT
budget?

EDWARDSON: Many areas of the business provide direction in terms of their long-term expectations. This has helped tremendously from a staffing perspective. An example of this includes pricing and rate implementation; we have a good feel for what might be normal volume, so we can staff accordingly. If there are planned increases, the responsible group will provide advance guidance so we can adjust.